Watch the Channel Lines – Part – Two

The 02/14/23 blog noted that if the Dow Jones Industrial Average (DJI) broke below channel line support at 33,581.42 it could open the door for a move down to at least 33,000.  Early in the DJI 02/17/23 session there was a break below channel line support.  The bears had almost an entire session to smash prices lower; they failed miserably.

The 15 – minute DJI chart courtesy of Trading View illustrates the action.

The following are the bullish factors that occurred since the top made on 02/14/23.

1. Bearish exhaustion.  The break below support happened in the first two – minutes of the 02/17/23 session. After a brief rally the decline resumed but only going  three  – points below the opening bottom.  The next six – hours  the trend was up.  
2. Strong retracement rallies.  After the top made on 02/14/23 at 34,331.47 there were three successive counter-trend rallies each with retracements greater than 70%.  This indicates strong bullish resistance to the prevailing down trend.  Another factor is the number of rallies since the 02/14/23 top.  Usually after a top there are  just two countertrend moves before a sharp decline occurs.  This decline  counting the 02/17/23 rally has four.
3. Bullish MACD.  Rally # 4  retraced 62.7% of the prior decline or a ratio of .627 which is close to the Fibonacci ratio of .618.  A case could be made that because  rally # 4 had the weakest percentage retracement,  and  near  Fibonacci resistance, that the rally was exhausted.  However examine the MACD – Histogram which is higher than the readings for the prior three rallies.  This is a bullish divergence and implies higher near-term prices.
4. Bullish RSI. The RSI reading on the 02/16/23 price peak was 57.36.  The RSI reading on 02/17/23 with a lower price peak was 59.17, another bullish momentum divergence.   

Downside price exhaustion, deep retracement rallies, and bullish momentum divergences strongly imply higher prices.  

The nine- wave Elliott – Horizontal Triangle illustrated in the 02/14/23 blog is no longer valid.  There could still be a Horizontal Triangle forming from the DJI high made in January 2022. The most likely alternate wave count has the 02/17/23 bottom as possibly  wave (G) of a developing nine – wave Horizontal Triangle.  

Seasonal Stock patterns are bullish until late April/early May.  If U.S stocks continue to rally, the DJI could make a new all – time high in April or May 2023.