Monday, April 13, 2009

Dow Jones Chart Pattern - Apr 10, 2009

Compared to the week before, the Dow Jones chart pattern for the holiday-shortened week ending on Apr 10, '09 is showing signs of tiredness, in spite of Thursday's 250 point spurt on higher volumes.

A look at the 6 months bar chart of the Dow will reveal why:-


(Please right-click on the image above and open it in a new tab or window for a better view.)

The upward momentum has definitely slowed and the index seems to be treading water around the 8000 level. The 20 day EMA has turned up and merged with the 50 day EMA, which has been almost flat for the past several trading sessions.

The Dow is still well below the 200 day EMA, and is not behaving like it wants to cross it any time soon. The MACD is positive and the signal line is rising. But have a look at the other indicators.

The slow stochastics, ROC and RSI are all making lower highs as the Dow is trying to reach higher. This 'divergence' - noticeable in other world indices as well - is indicating a correction in the offing.

Compare the Dow chart pattern with the Taiwan (TSEC) and Sensex chart patterns discussed over the weekend. While the TSEC has pierced through the 200 day EMA and the Sensex is just short of doing so, the Dow is mirroring the weakness of the US economy by remaining well below the 200 day EMA.

Bottomline? Investors who are not risk averse (don't know if they exist any more!) can move some money out of US funds and start to deploy in Asia funds.

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