The first chart DJIA 6 month should have a resistance trendline. I have drawn it connecting 1916 highs and 2000 highs. This allows the 1929 bubble to poke above the resistance but that is understandable. This line also connects with highs in May - Aug 2021. Then it slightly rises above the line in NOV2021 and JAN2022. Now the resistance is around 40,000 give or take.
This is on long scale, remember. Then I have the support drawn from 1942 lows connecting 1974 lows and 1980 lows. The lows in 1932-33 slightly break below but that is understandable considering the panic. Again in 1982 DJIA cuts below my support line a bit. Following the support line to 2024, support is at 9,000. Interesting to think how far down that is, and how close we are to resistance.
I decided that a resistance line on that chart would detract from the support message. Plus the inflation adjusted chart showed a better resistance and support channel. On the 6 month chart, I like the resistance line through the 1898? high and the 2008 high. That makes it parallel to the support line, which I prefer.
It's surprising that the 1929 'bubble' isn't so extreme based on that line. It also suggests that the DJI is exceeding that resistance and ready to drop, which is a very different perspective to the mid-channel conclusion from the monthly chart.
It's reasonable to draw a slightly higher support line, and I often do that, and if they turn out parallel, then they give validity to each other. With the slightly lower resistance line, and being above it, there is indeed a long drop to support.
Do you know how to make an inflation adjusted chart? That would likely be very interesting.
QQQ on a log scale going back to 2009 is interesting. The support trendline connects the lows from 2010, 2011, 2016, 2018, 2020, and 2022. A parallel resistance line can be drawn in 2 places. The first one goes thru the peaks in 2011, 2014, several peaks in 2018, and 2020. All of 2021 is above this line. The bear rally in 2022 was stopped by this line and so was the JUL2023 rally. Currently we are above like in 2021. A second trendline could be added that contains all the 2021 prices. In that case QQQ would reach over 500 before getting to resistance.
Personally, I would not trade using the long-term lines but they could be used that way. 2021 was the problem and shows why you need to be flexible and if you sold 11JUN2020 when it fell back below the resistance, you were not biased enough to short. 4 days later it broke above resistance again and went on an 18 month rally above a 12 year trendline.
You could buy at support, but there is no guarantee it holds, so you need a stop loss in case it drops like 1929.
Excellent points. For some reason my chart was clicked off log scale yesterday which threw me off track later in the day looking at SPX, NDX and DJI. Everything is much clearer now for all of them on log scale.
The June-July, 2020 scenario is very much like now. That long resistance trendline held in June, then became support in July, broke slightly July 24, then roared up. It fell back to support in September (double bottom) and November. Then it started a steady, slightly steeper uptrend from that long term line. Correct? My lines have been jumping around when I switch to different time frames. Please let me know if that's what you see as well. Thanks.
For QQQ, I have the long-term (since 2009) weekly resistance holding on in FEB2020, holding in JUL2023, holding in DEC2023, then breaking 19JAN2024. All of 2021 is above this line. These are always going to be approximate and can be broken.
The first chart DJIA 6 month should have a resistance trendline. I have drawn it connecting 1916 highs and 2000 highs. This allows the 1929 bubble to poke above the resistance but that is understandable. This line also connects with highs in May - Aug 2021. Then it slightly rises above the line in NOV2021 and JAN2022. Now the resistance is around 40,000 give or take.
This is on long scale, remember. Then I have the support drawn from 1942 lows connecting 1974 lows and 1980 lows. The lows in 1932-33 slightly break below but that is understandable considering the panic. Again in 1982 DJIA cuts below my support line a bit. Following the support line to 2024, support is at 9,000. Interesting to think how far down that is, and how close we are to resistance.
I decided that a resistance line on that chart would detract from the support message. Plus the inflation adjusted chart showed a better resistance and support channel. On the 6 month chart, I like the resistance line through the 1898? high and the 2008 high. That makes it parallel to the support line, which I prefer.
It's surprising that the 1929 'bubble' isn't so extreme based on that line. It also suggests that the DJI is exceeding that resistance and ready to drop, which is a very different perspective to the mid-channel conclusion from the monthly chart.
It's reasonable to draw a slightly higher support line, and I often do that, and if they turn out parallel, then they give validity to each other. With the slightly lower resistance line, and being above it, there is indeed a long drop to support.
Do you know how to make an inflation adjusted chart? That would likely be very interesting.
QQQ on a log scale going back to 2009 is interesting. The support trendline connects the lows from 2010, 2011, 2016, 2018, 2020, and 2022. A parallel resistance line can be drawn in 2 places. The first one goes thru the peaks in 2011, 2014, several peaks in 2018, and 2020. All of 2021 is above this line. The bear rally in 2022 was stopped by this line and so was the JUL2023 rally. Currently we are above like in 2021. A second trendline could be added that contains all the 2021 prices. In that case QQQ would reach over 500 before getting to resistance.
Personally, I would not trade using the long-term lines but they could be used that way. 2021 was the problem and shows why you need to be flexible and if you sold 11JUN2020 when it fell back below the resistance, you were not biased enough to short. 4 days later it broke above resistance again and went on an 18 month rally above a 12 year trendline.
You could buy at support, but there is no guarantee it holds, so you need a stop loss in case it drops like 1929.
Excellent points. For some reason my chart was clicked off log scale yesterday which threw me off track later in the day looking at SPX, NDX and DJI. Everything is much clearer now for all of them on log scale.
The June-July, 2020 scenario is very much like now. That long resistance trendline held in June, then became support in July, broke slightly July 24, then roared up. It fell back to support in September (double bottom) and November. Then it started a steady, slightly steeper uptrend from that long term line. Correct? My lines have been jumping around when I switch to different time frames. Please let me know if that's what you see as well. Thanks.
For QQQ, I have the long-term (since 2009) weekly resistance holding on in FEB2020, holding in JUL2023, holding in DEC2023, then breaking 19JAN2024. All of 2021 is above this line. These are always going to be approximate and can be broken.
I updated the TQQQ article with new charts and will do this article after I have some breakfast. https://briancellars.substack.com/p/tqqqhqu-leverage-can-be-a-useful