Monday, November 23, 2009

Dow Jones (DJIA) index chart pattern - Nov 20, '09

Last week I had mentioned the level of 10360 in the Dow Jones (DJIA) index chart pattern as the barrier that needed to be crossed convincingly for the bull rally to continue.

The technical indicators were favouring the bulls and they took full advantage to take the Dow above the 50% Fibonacci retracement level of the entire bear market fall. The bulls look unstoppable now.

Let us have a look at the 6 months bar chart pattern of the Dow Jones (DJIA) index and check if the bears have been routed completely:-


A sharp jump by the index on Mon, Nov 16 '09 led to three consecutive closes above the 10400 level. But the up move on low volumes - which has been a feature of this bull rally - could not sustain.

The bears managed a token fight back by pulling the Dow below the crucial 10360 level on the last two days of the week. The index still managed to close about 48 points higher for the week.

All three EMAs are moving up. The sequence of higher tops and bottoms continue. The periodic bear attacks have only strengthened the resolve of the bulls. The technical indicators are continuing to support them.

The RSI has moved up and is about to enter the overbought zone. The MFI is above the 50% level and moving sideways. The slow stochastic has dipped a bit but remains in the overbought zone. The MACD is positive and above its signal line.

The state of the economy remains a concern. Unemployment is still in double digits. Insider buying picked up but insider selling far outweighs the buying, as per this article. The capital adequacy ratio of most banks are far from adequate, mentions this article.

Bottomline? The Dow Jones (DJIA) index chart pattern continues to climb a wall of worries. That is the sign of a bull market. Bears can hope that the lack of follow-up buying (i.e. low volumes) and insider selling will lead to a healthy correction soon. Partial profit booking recommended.

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