More downward pressure to come?

The US stock market closed remarkably lower last night, due to weak retail data and what has been referred to as a "lending crisis". Have we seen the dead cat bounce, with more downward movement to come on world markets?

During the first market sell off a couple of weeks ago, I saw an interesting chart presented by Alan Kohler. He plotted the Dow Jones Index over the last 3 years. What he showed was a tight trading range, which has been broken in the last 3 months of the current bull run.


I have attempted to replicate the diagram, using the Australian All Ordinaries Index. As it can be seen, this trading range has rarely been broken within the last 3 years, and when it has been broken, it hasn't taken long to correct itself.

What this indicates, is that we may see more downward movement, possibly down as low as 5,400 points. If the uptrend for the last week continues, it may spell the end of the current trading range. I think not however.

Expect to see more red today, an possible more red in the coming weeks!