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Monday, June 1, 2009

Dow Jones (DJIA) Index Chart Pattern - May 29, '09

Like a person who has downed a few too many at the local watering hole, the Dow Jones (DJIA) index chart pattern has been stumbling along in no particular direction, seeking frequent support from nearby lamp posts (read, the 20 day EMA).

A look at the 3 months closing chart pattern of the DJIA shows how the index has been desperately clinging on to its short-term moving average. As if it is afraid that if it falls down, it may not be able to get up again.

Dow_May2909 

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

Compare the Dow Jones index chart pattern above with the Hang Seng chart pattern analysed on Sun. May 31, '09. Notice how the Hang Seng has been using its 20 day EMA like a trampoline to jump higher and higher, way above its flattened 200 day EMA.

The long-term average of the Dow Jones index is still moving down. In today's trade so far, the DJIA is trying to make a dash towards its 'home' (viz. the 200 day EMA). Let us see if it finally makes it or falls flat on its face.

The slow stochastic fell below the 50% level and is attempting to get back above it. The MACD is in positive zone but below its signal line. The ROC is at its mid-point '0' line. The RSI is also at its 50% level.

The volume had dropped last week, but Friday's up move was on slightly higher volume. All the technical indicators are also showing a slight upward bias. Things may change if the extent of damage to the economy by the impending GM bankruptcy dawns on market participants.

Bottomline? Enjoy the ride while it lasts. A lot of fundamentally weak stocks have moved up. Book profits in them. Keep strict trailing stop losses for your core holdings.

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