Thursday, May 10, 2012

Dow Jones vs. VIX - Further Selldown Towards 12500-12600 Levels

Wall Street Recap: Dow Jones drops 97 points to record its 6th straight decline
The Dow Jones tumbled as much as 183 points intraday before ending 97 points lower as investors fretted about political uncertainty in Greece and the escalating borrowing costs of Spain and Italy.

Equities trimmed losses as Europe’s bailout fund said it will pay the next installment of €4.2bn aid to Greece today, the remaining €1bn before June and will be disbursed depending on the financing needs of Greece.

Dow Jones has shaved 444 points or 3.3% over the last six sessions as risk-averse investors piled into the dollar and U.S. Treasury.

Wall Street Outlook: All eyes on Bernanke tonight
The Dow Jones closed below its uptrend channel support as well as its 50 SMA near 13057. The index also briefly dipped below the 100-d SMA of 12818 to as low as 12750, which give initial signal that the trend is about to change. Moreover, the VIX index is suggesting that the Dow is likely to experience more downward consolidations from its peaks as FIG 5 shows that previous three peaks (which was subsequently followed by sizeable corrections) since 08, for the Dow were accompanied by bottoms for the VIX.

All eyes are on Bernanke speech tonight in anticipation of more stimulus program following a wave of disappointing U.S. jobs data and political backlash in Europe.

A disappointing speech by Bernanke without clearer signals of more stimulus is likely to witness a breakdown below the crucial neckline support of 12710, signifying a double top reversal and could trigger further selldown towards 200-d SMA support.  

Daily Dow - A Breakdown Below The Crucial Neckline Support Near 12710 Will Signify A Double Top Reversal With Potential Correction Towards 200-D SMA

Weekly Dow Jones - Crucial Support Near 30-W SMA To Prevent Further Selldown Towards 50-W SMA

 Dow Jones vs. VIX - Further Selldown Towards 12500-12600 LevelsDowJones10-05-2012b

 Source: HLIB Research

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