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Monday, June 8, 2009

Dow Jones (DJIA) Index Chart Pattern - Jun 5, '09

Last Monday (June 1), the Dow Jones (DJIA) index chart pattern made a final dash towards its 200 day EMA on higher volumes. After reaching its goal, the last remaining energy seemed to get drained out of the index. For the rest of the week, it drifted sideways on reducing volumes.

On Friday (June 5), a brave effort made the Dow pierce through its long-term average, only to fall back and close below it. The week's trading stopped the 200 day EMA from falling, though the DJIA was unable to close above it.

The 3 months closing bar chart pattern of the Dow Jones (DJIA) index shows that it is still technically in a bear market:-


The technical indicators are looking stronger than the previous week. The slow stochastic has moved up and is just below the overbought zone. The MACD has also moved up and above its signal line. The RSI has moved above the 50% level. Only the ROC has slipped down a bit.

But all doesn't seem well for the DJIA. After it hit the 8000 level on Mar 26, '09 - it has consumed all of 10 weeks to rise 10%. While the Dow has been making higher tops, the ROC and RSI have been making lower tops. This negative divergence, coupled with disappearing volumes, do not augur well for the index to continue its rally much longer.

The fundamental picture is becoming 'less bad'. It's still a long way from becoming good. The banks-that-can-not-fail should raise some money quickly before the window of opportunity shuts.

Bottomline? The Dow Jones (DJIA) index chart pattern has not been able to conquer the overhead resistance from its 200 day EMA yet. Keep taking profits off the table and continue to keep trailing stop losses on your remaining stock holdings.

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