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Monday, October 12, 2009

Stock Index Chart Patterns - Dow Jones (DJIA) and Bovespa (Brazil), Oct 9, '09

Dow Jones (DJIA) index chart


The Dow Jones (DJIA) index got good support at the 50 day EMA and jumped up swiftly to gain back the prior week's losses and reach a new closing high of 9865. The index seems poised at an interesting juncture - less than 50 points away from its previous high of 9938, made on Sep 23 '09.

All three EMAs are moving up, but volumes remain muted. The slow stochastic has changed directions and crossed the 50% level. The RSI and MFI are both below their 50% levels and moving sideways. The MACD has moved up to touch the signal line.

The Dow chart pattern is looking very similar to the European indices, which look to be in buoyant moods. An attempt at crossing the psychological level of 10000 is on the cards.

Bovespa (Brazil) index chart

My previous look at the Brazil Bovespa index chart pattern was 4 week's back. At that time, the index had just completed a correction down to the 50 day EMA and jumped back up (just like the Dow did last week). Since then, the bulls have been relentlessly charging and the index gained 9% while the Dow managed just a 2% gain.


A quick glance at the 3 months bar chart pattern of the Bovespa shows that the Brazilian index is on much stronger footing. The slow stochastic is well entrenched in the overbought zone. Both the RSI and MFI are above their 50% levels. The MACD is moving up and is above the signal line.

All the three EMAs are moving up smartly. But the new high on Oct 9 '09 was on much lower volume. Could it be a sign of buying exhaustion? The negative divergences in the RSI and MFI are the other concerns.

The Dow has gained more than 50% from its Mar '09 low. The Bovespa has gained more than 100% since its Oct '08 low. At some point, both indices should face deeper corrections, as it has been a one-way rally so far for both. When? That's a million dollar question.

Bottomline? The Dow Jones (DJIA) and Bovespa (Brazil) index chart patterns are in bullish moods. Keep tight stop losses and enjoy the ride.

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