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Monday, April 20, 2009

Dow Jones Chart Pattern - Apr 17, 2009

Last week, my comment about the Dow Jones chart pattern was: The upward momentum has definitely slowed and the index seems to be treading water around the 8000 level.

The DJIA closed higher for the 6th week in a row but was reluctant to go much beyond the 8000 level. Let us have a look at the 3 months bar chart pattern of the Dow:-

Dow_Apr1709

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

The only difference from the previous week is that the 20 day EMA has crept up above the 50 day EMA. But the index has flattened out, and so have the slow stochastics (which is in the overbought region) and the MACD.

The ROC rose during the week but made a lower high. The RSI has turned down and is headed towards the midpoint. The Dow seems happy to be above the 50 day EMA and is in no hurry to get anywhere close to the 200 day EMA. As long as the index remains below the long-term average, this isn't a bull market.

Contrast this with the Taiwan (TSEC) and Brazil (Bovespa) indices - both of which have crossed their respective 200 day EMAs, though the upward momentum has slowed.

Despite some experts opining about 'green shoots' and 'light at the end of the tunnel', the economic slowdown is far from getting over. Home foreclosures are back with a bang and joblessness is not showing any signs of abating. The positive results declared by a few companies should be carefully checked with a fine-tooth comb for fictional content.

Bottomline? Investors should use this rally to get rid of their non-performing or dud stocks. Buying should be postponed till the next dip.

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