US market volatility eases

The US market has been very volatile in the past few weeks because of the financial saga involving collapse of major financial institutions and the governments desperate move to use public funds to bailout ailing companies and save the financial industry from disaster. The government intervention has caused to the market to ease a little and go into a correction.

The US Dow Jones Industrial Average (DJI) volatility has started to ease. The daily Average True Range (ATR) has eased from 750 points last week to 600 points this week. The ATR of 750 was the highest ever for the DJI. Even at 600 points it is considered high.

Today, the DJI closed 170 points higher after a weak start. The DJI went to a low of 8243.55 points. Support came in about one and a half hours before the market closes at the DJI rose more than 400 points to close at 8691.25 points. The US market have been in this kind of trading volatility in the past few weeks.


Daily DJI chart as at 23 October 2008 using NextVIEW Advisor. Click on chart to view enlarged chart.

The correction in the DJI has formed a short term triangle pattern on the chart. A triangle pattern is a trend continuation pattern. The down trend is expected to continue once the support is broken (See chart below). The DJI did break below the support level today but managed to climb back above the support level, causing it form a pivotal support level at 8243. The DJI is expected to decline if it breaks below this pivotal support with a price objective of 6,400 points.

However, if the DJI is able to go above the triangle resistance, which is at 9,200 points then we may expect the DJI to consolidate further. There is a low chance of DJI forming a rally upwards because of the strong down trend and bearish market sentiments.

Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.