Breakdown in Dow Jones - Revisited - 03 July 2009

I am writing this at 12.30 am Indian time. About 3 pm NY time which means NYSE will close in another hour. But since I cannot stay awake that long, hence writing this blog now.

The Dow Jones has taken a severe beating today until now - to put it mildly.

It is down 178 points or 2.12% and tottering at 8326.

A head and shoulder formation is likely taking shape, BUT for confirmation, we will have to wait for the breakdown below 8200 which is the neck line.

I leave it to the reader to contemplate the implications of this for Indian market. True, India is somewhat insulated but with a global economy still reeling ( though not slipping down an abyss anymore perhaps), I will be concerned about the US stock market potentially heading down.

Actually, I did write on 22 Jun about a scenario of Dow heading south in my blog Breakdown in Dow Jones - 22 June 2009, worried as I was about the ferocity of that fall. I am worried in the same way today after today's fall in Dow Jones.

Perhaps, Dow will find support at 8200, perhaps Nifty will not fall even if Dow goes down to 7800, but it does pay to keep this scenario in mind and take some basic precaution (such as buying a July 3800 put).

If you have any comments please write to me at stockmarket.methods.in.madness@gmail.com

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Disclaimer: The above analysis is just that - my analysis. If you choose to trade on the basis of this analysis, you will be solely responsible for the outcome of the trade - profit or loss. Please keep in mind that trading and in particular day trading is not for the novice and there is significant risk of loss of capital in trading.