Monday, January 4, 2010

Dow Jones (DJIA) index chart pattern - Dec 31, '09

Last week, the Dow Jones (DJIA) index chart pattern was consolidating sideways, but the RSI, MACD and slow stochastics were showing negative divergences. The Santa Claus rally didn't materialise, though the index did make a new high of 10606 on Dec 29 '09.

But severe lack of oxygen (read: volumes) at the higher altitude forced the Dow to close below the 10500 mark by the year end. Year-on-year, the Dow gained just under 19%. Not bad - but a pale shadow of the impressive 81% gain of the BSE Sensex index.

The rise in the existing home sales figures and house prices didn't have too much effect as the figures probably hide more than they reveal, as this article seems to suggest.

The 6 months bar chart pattern of the Dow Jones (DJIA) index shows that the bulls haven't quite shaken off the bear shackles:-


The upward momentum of the 20 day EMA is slowing down as a result of the sideways consolidation of the index. But the 50 day and 200 day EMAs are still rising. The bulls are struggling but still in command. How much longer can they dominate without volume support? As long as the money tap (economic stimulus) remains open.

The RSI and MFI are both above their 50% levels but have dipped a little. The slow stochastic has dropped from the overbought zone and the %K line has crossed below the %D. The MACD is still in positive territory but has slipped below the signal line. The technical indicators are pointing to an effort by the bears to seize the initiative.

Bottomline? The Dow Jones (DJIA) index chart is showing some difficulty in staying above the 10500 level. But this bull rally on low volumes has surprised on the upside every time the bears have tried to dominate. So look for another thrust towards a new high.

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