Saturday, October 17, 2009

When Will The Dow Jones Crash?

Earlier this week beginning Wednesday October 14th, the Dow Jones Industrial started testing new highs just over 10,000 and closing just over 10,000. The following day Thursday October 15th, we started the day under 10,000 but thrusted up over 10,000 by the end of the day. Friday there was a few highs barely over 10,000 and finally we ended the day at 9995.91. The Dow Jones right now is at a place where anything can happen. It can either gain strengh and shoot up to 11,000 over the next couple of weeks or the weakening Dow Jones might turn around and start heading down for a while. How low will the Dow Jones go? I have no clue, but if you are familar with elliot wave theories or fibonacci retracements the Dow Jones is likely to crash hard into the ground. Since bulls owned the Dow Jones since the 1970's it is possible that the Dow Jones might drop down to the support we saw in the 1970's which would be around 1,000. That can be completely devastating!

What is also interesting, if we were to compare the dow to the price of gold, back in 1999 when the Dow Jones first started testing new highs around 10,000, the Dow was worth about 40 oz of gold. This week the second time the dow is testing highs at 10,000 the dow is only worth about 9 oz of gold. In order to have the same economy with the same dow to gold ratio the dow today would have to be at approx 42116.

Personally I believe the Dow Jones will have a severe crash in the near future. My hope is that if it does we can go back to trading in silver and gold.

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