Monday, November 9, 2009

Dow Jones (DJIA) index chart pattern - Nov 6, '09

The Dow Jones (DJIA) index chart pattern had received support at the 50 day EMA the previous week, had an expected bounce up above the 20 day EMA and regained the 10000 level after 10 sessions, gaining 3.2% (311 points) for the week.

The index is approaching two important levels - the previous high of 10158 (made on Oct 21 '09), and 10360 (the 50% Fibonacci retracement of the entire bear market fall). Resistance to the up move can be expected at those two levels.

Let us have a look at the 6 months closing chart pattern of the Dow Jones (DJIA) index:-


Will the bulls muster enough strength to cross the two resistance levels mentioned? Or, will the bears be able to beat them back? The technical indicators are decidedly mixed.

All three EMAs have resumed their up moves and the index is above them. That shows the bull rally is intact. But the falling volumes tell a somewhat different story. The recent volume peaks occurred on down days.

The slow stochastic has moved above the 50% line after a bullish cross of the %K above the %D. The MACD has moved up to touch the signal line in positive territory. The ROC has moved above the '0' line. The RSI has moved up to the 50% level. The bulls have the edge.

But look at the negative divergences in the MACD, ROC and RSI. Since Jul '09, they are making lower highs while the Dow made higher tops. This raises a big question mark about the continuation of the bull rally.

The unemployment figures entered the dreaded double-digits at 10.2% - the highest since 1983. The market didn't seem too affected by it and closed slightly higher last Friday (Nov 6 '09). Read why here.

Bottomline? The Dow Jones (DJIA) index chart pattern had broken below a rising wedge pattern, and is trying another pull back towards the trend line. Use the opportunity to book profits.


Unknown said...

Hello sir,
Did not blog since last five days.
Hope everything is fine with your health.
take care
manssor panjwani

Subhankar said...

Appreciate your concern, Mansoor.

Have been tied up with some pressing family matters, and could not spare time during the week. Hopefully, will be back in action from next week.