Dow Jones Industrials 12/21/08

There are numerous cracks and red flags to note on this index across most time frames. Starting with the 60 min charts we can see that we lost trend line support. I expect some sort of back-test to perhaps 8750 next week with the oscillators approaching over sold territory. Looking at the MACD, I expect a decent price move before the holidays. It is getting extremely tight and its high and lows are getting narrower. Potential levels of support are as follows: we have minor support at 8400 with perhaps more significant support coming in at just below 8200. I believe 8200 is a more realistic downside projection. However, should that give way there isn't much in the way of retesting our November lows.

The daily chart looks more ominous. So far this rally has been capped by the 50 EMA. Textbook bear market action. In addition to losing short term trend line support, we also lost the 20 EMA support. As far as the oscillators and indicators go, we have the RSI hovering around that 50 level. That is a red flag for sure as it is usually considered over bought territory in a bear market. In addition to that, we have the MACD recycled back to the zero line and looking heavy. Volume has remained quite light during this rally, and we have the stochastics making a bearish cross out of over bought territory with negative divergences to boot. Of course the only thing that matters is price. I'd personally like to see if that 8200 support would try to contain this move. If not, we all know what that means. If so, it would signal to me that perhaps we remain locked in a narrow and frustrating range before the next shoe drops. I post charts pulicly on stockcharts.com. The link is http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2899092