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Monday, December 28, 2009

Dow Jones (DJIA) index chart pattern - Dec 25, '09

In last week's analysis of the Dow Jones (DJIA) index chart pattern, I had mentioned the possibility of the index consolidating for a while longer. Not surprisingly, the Dow traded within the narrow band of 10300-10550 and closed 191 points higher for the week at 10520 - its highest close for the year.

But all is not well for the bulls as the pattern of higher tops and bottoms on all four days of a holiday-shortened week was on much reduced volumes. This bull rally continues to defy the weak fundamentals and technicals and there is no alternative to following the up trend indicated by the three rising EMAs using trailing stop-losses.

The 6 months bar chart pattern of the Dow Jones (DJIA) index shows that the technical indicators are showing more strength than last week:-


The RSI has edged above the 50% level. The MFI is above the 50% level and moving up smartly towards the overbought zone. The slow stochastic bounced off the 50% level and is also rising towards the overbought zone. The MACD looks a little weak, moving up to touch the signal line in the positive zone.

While the Dow has been in a sideways consolidation, the RSI, slow stochastic and MACD are showing downward biases. The negative divergences may prevent a Santa Claus rally.

Bottomline? The Dow Jones (DJIA) index chart pattern continues to consolidate. Stay invested. Booking partial profits can also be a good idea.

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