In our September update, I noted that DJIA had dropped back below several potentially bearish lines in the sand in late August:

– the huge red channel
– the white 1.272 extension
– the megaphone upper bound

I went on to vent about how the Dow is one of the least reliable indices to forecast using patterns and Fibs.  It’s just too easily/heavily manipulated.

With BoJ and FOMC meetings coming up, I wondered:

Friday’s action, for instance, showed the index closing above the 1.272 and a potential falling channel midline.  Would it really surprise anyone if TPTB were able to push the Dow back above the megaphone/channel top, too?

Guess what?

continued for members…

DJIA is well above the 1.272 and, just this past Thursday and Friday, pushed back above the channel/megaphone top.

The only potentially important feature it hasn’t topped yet is the top of the purple channel shown below.  It’s not a great looking channel.  The bottom is ill-defined and the last week’s push should have stopped at the white .618.

But, the fact that it intersects with the white .786 and purple .236 is reason enough to assign at least a small chance of it providing for a reversal.  I’d put it at no more than 25%.

The more probably outcome is that, with both the BoJ and FOMC holding forth the coming week, we’ll again see important overhead resistance eliminated.  The downside Fib patterns, for instance, would be trashed at 18351 — only 4% higher than Friday’s close and the equivalent of 2-3 sessions of algo-driven meltup.

Of course, the CBs could always disappoint as they did in August.  But, I wouldn’t bet on it.

Stay tuned.