An Update on a Deteriorating Stock Market

Last time I commented on the market, the Dow appeared to be oversold, and I talked about the landscape and what had to happen for a rally to ensue. I was hopeful. The rally never occured because the barriers (the moving averages)were too powerful for the indexes to surmount. The Dow has fallen 1143 points since that date.

At this time when I look at the Dow, I see almost the same chart I saw last year on February 5, 2008. When you look at the Dow now, you have to ask, "what's wrong with that picture". On both charts, (2008 and 2009)the dominant feature is a descending triangle. Last year, the triangle spanned about two months and this year, the triangle spans three months from Novenber to February. Typically, triangles end with a price breakout either up or down, depending on the slope of the triangle. Both last year's chart and this year's chart show delining triangles.

From last year's descending triangle to today, the Dow declined 4483 points. Looking at the current market, a breakout from the triangle on the downside could point to a severe further decline in the market. Hold on tight.