Monday, October 26, 2009

Dow Jones (DJIA) index chart pattern - Oct 23, '09

There wasn't much progress in the Dow Jones (DJIA) index chart pattern last week. A new high of 10158 was made on Oct 21 and the index closed above the 10000 mark on 3 days. But the momentum could not be sustained, and the Dow closed almost 24 points lower for the week. That made it a 'reversal week' - a higher high and a lower close.

The 50% Fibonacci retracement level of the entire bear market fall is at 10360, and till the Dow closes above it convincingly, the future of this bull rally may remain a question mark. The good results declared by Amazon and Apple were not enough to coax the index upwards.

Let us have a look at the 6 months bar chart pattern of the Dow Jones (DJIA) index to see whether the bull rally is under any threat:-


The 20 day EMA provided support during the mid-week correction. All three EMAs are moving up, and there seem to be no chance for the bears to get the upper hand.

The low volumes remain a concern. The negative divergences in the technical indicators show that the momentum of the bull rally may be slowing down.

The slow stochastic is in the overbought zone. The RSI is moving up towards its overbought zone. The MFI is above the 50% level. The MACD is falling but is above the signal line. No bearishness is visible.

An interesting game of 'dare' is playing out between USA and China. The latter refuses to revalue its currency. So the dollar is being allowed to slide. The Obama administration has stopped short of imposing trade sanctions - though duties on Chinese tyres is a warning signal.

Bottomline? The Dow Jones (DJIA) index chart pattern continues to look bullish. At the time of writing this post, the index has moved above the 10000 level again. Will it clear the hurdle at 10360? Investors should wait and watch.

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