Monday, July 6, 2009

Dow Jones (DJIA) Index Chart Pattern - Jul 3, '09

In the previous week's discussion, the Dow Jones (DJIA) index chart pattern seemed to have had its run in the sun. The brief dalliance with a new bull market barely lasted a week in early June '09, when the index moved above its 200 day EMA.

The higher unemployment figures last week proved to be the last straw. The 3 months bar chart pattern of the Dow Jones (DJIA) index dropped below its 50 day EMA and is now below all the three moving averages. The 20 day EMA has turned down, and once that moves below the 50 day EMA as well, it will be 'game over' for the bulls.


The holiday shortened week saw very low volumes. The RSI bounced up from the oversold region and moved sideways below the 50% level. The indicator provided a faint ray of hope for the bulls.

The MFI is headed down towards the oversold zone. So is the slow stochastic, after a brief respite. The MACD has been in the negative for 7 straight sessions. Its signal line will join it in bear territory soon. The DJIA seems to be in a mood to sing an old Allman Brothers song: 'Well I'm Southbound'.

Is there no hope at all for the bulls? Not quite. May factory orders were a little better than expected. Housing prices fell more slowly. Oil prices went below the $70 mark. Q2 results may be a little better than Q1, as per estimates. Nothing to crow about, but the free fall in the economy has been arrested some what.

Bottomline? The bulls may try to make a last stand. But the Dow Jones (DJIA) index chart is unlikely to move up in a hurry. Await Q2 results before re-entering.

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