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Monday, April 6, 2009

Dow Jones Chart Pattern - Apr 3, 2009

In last week's discussion of the Dow Jones chart pattern, I had pointed out the similarities and differences with the Sensex chart pattern. This week's chart patterns of the Dow and Sensex have more similarities than differences. In fact, they almost look like carbon copies (remember those?) of each other.

A look at the Dow Jones 6 months closing chart pattern will make it clear:-

Dow_Apr0309

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

The similarities first. The slow stochastics is in the over bought zone, but looks like it wants to stay there awhile. MACD is positive. ROC and RSI indicators have reacted from over bought areas and have made lower highs, indicating 'divergence'. But overall, the indicators are confirming the bullish behaviour of the index.

But there are a few significant differences with the Sensex chart pattern. The recent Apr '09 high is still way below the Jan '09 high. Volume during the later part of the rally (that began in early Mar '09) is lower than that in the earlier part of the rally.

The 20 day EMA is turning upwards but is still below the 50 day EMA. (In the Sensex chart pattern discussed on Saturday, the 20 day EMA had crossed above the 50 day EMA.)  So the Dow rally appears to be weaker than - and lagging - the Sensex rally.

Bottomline? For investors interested in the near term outlook of the Sensex, looking at the TSEC (Taiwan) and Hang Seng indices may give a better picture. The stock market technicals are beginning to reflect the fact that Asian economies are in a better shape than those of the USA and Europe.

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