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Again. We had a price consolidation – as consolidation and movement of prices – right around this significant resistance level, which we hit back here.
This is significant. It’s a change in psychology. We finally broke through and stayed above it for a little while, and then it sold off again. Look what happened. We went right back up again, broke through it, consolidated, and then continued to move higher in the markets.
There are not too many times where a resistance point is hit – actually, when this came up, we didn’t know it was a resistance point. We only knew it was a resistance point when the market sold off from it. Then, when it came back up to that level, we knew it was a real resistance point because prices hovered in that area for so long. They didn’t sell off, which shows quite a bit of strength. At the same time, they didn’t break through it.
They consolidated a little bit. They started coming back up toward that price level, and now, they absolutely blasted through it. Then what happened? We were in an extremely long uptrend channel here, for quite a number of years. I had traced this channel, going all the way back to 1905, or maybe even earlier. Maybe the year 1900.
This channel, and this resistance point here, during the ’70s, was a resistance point that was significant in its breakthrough. This channel here goes all the way back to 1900. We broke through it right here. That was in 1995. Look what happened. We had an unbelievable, exuberant run-up in prices, didn’t we?
What happens every time there’s an exuberant run-up in prices? Prices sell off. Now, there may have been some significance to the 10,000 level, that was broken through here. It came up to 11,5000, before it fell back down again. I’m not sure. I know a lot of people were talking about the 10,000 level as a resistance level, that they were afraid that the market was going to sell off dramatically.
When it came off to 10,000, and it didn’t sell off – it actually blasted through there – it didn’t hit a dramatic resistance point and sell off right away, but it did consolidate in this area, for how many months? Let’s draw a line where the 10,000 price level is. You can see that it broke through, but it actually could not make much progress above that. It just consolidated.
These are monthly bars, so this is 28 months it spent in this consolidation period, between 11,500, and 10,000. For 28 months, all it did was go back and forth in this 1,500 level. The bulls couldn’t make any progress going up. The bears couldn’t make any progress coming down, until here. When it hit this 10,000 level and it broke through to the downside, it kind of consolidated back up, and it went through to the downside again.
This 10,000 level, which was broken through, had become some sort of support. It wasn’t broken through until here. Then it became resistance, and it sold off dramatically, after that. Then what happened?
We came up. We sold off. We consolidated some more. We started going back up to that 10,000 level. This time, however, it started falling back down into this 10,000 level – it kept falling below it, and closing above it. It did that for another 7 or 8 months, before it finally decided to significantly blast through this price and start its upward climb again, breaking through the 11,500 level, which had been resistance for these 28 months.
Where does that leave us? We broke through that 11,500 level. That was at the end of 2006. This is where we are today. We broke through that level. We came back up. Now, let’s take a look at these prices on a weekly basis. You can see that once we broke through this 11,500 level, it was a resistance point going all the way back to here, and here.
This resistance point was broken through, and we had another exuberant run in prices. What happens after we have an exuberant run in prices? Prices will sell off and back off. Look at this one particular bar here, that it came down to. It almost came down and touched this 11,500 level, which was a significant breakthrough area, going back all the way to 2004. It was a fairly significant resistance level here, and it turned into support just recently in the markets.
Now, once again, we had an exuberant run-up in prices. We also had a very long-term channel here. I had it going upwards. It fell through those channel lines, and it started consolidating. It broke through it again, and then it started coming back down again. We are again in this consolidation phase of the market. I always like to take a look at these historical trends – where the market has been, and where it potentially is going.
What it does, is it shows you that there is really nothing new under the sun, when it comes to the stock market. These kind of up-and-down runs, and exuberance and sell-offs, keep happening over and over again in the markets. There’s really nothing new in the markets. There hasn’t been anything new for over 107 years, at least as long as we can go back on this chart.
Now that we have gotten to this point, a lot of people said that there was going to be a very significant resistance level at 15,000. What actually has happened is, we hit a fairly significant resistance level at 14,000. 14,000 seemed to be a significant resistance level.
We say that it is significant because the first time that prices hit this 14,000 level, they sold off dramatically. If prices hit this 14,000 level and did not back off significantly, then we would not consider this to be a significant level of resistance. Because they have sold off here, they consolidated, they came back up to that 14,000 level, and stayed above it for 1 month, but then sold off again dramatically after that – that makes the 14,000 level even more significant.
If you recall, going back, we were in a consolidation phase here, for several years. If we go back even further, I showed you that there was a consolidation level back in this area, that took place for even more years. There was one resistance level here from 1966, all the way to 1985.