Sunday, June 26, 2011

Dow Jones World Stock Index - Healthy Correction or More Downside to Come?



As we notice in the weekly chart above, after touching the 178.6% Fibo extension of 2010 spring correction, the Dow Jones World Stock Index correction reached a critical long term support found at the confluence of 2010 - 2011 uptrend, Fibo fan line and the flat weekly 50EMA. A break below mentioned support could quickly target the next two Fibo fan lines support, otherwise the long term uptrend could resume and the world stock markets may challenge the May 2011 highs.

Zooming in through a daily chart below we notice a potential Head&Shoulders formation with a down sloping neck line that was broken, then tested thus the index being now theoretically prepared to drop to at least its H&S projected target that coincides with the second Fibo fan line support. A return above the neck line negates the bearish daily chart view.

If the drop towards the H&S projected target unfolds in the coming days and weeks, the world stock markets will remain under downward pressure.


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