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Monday, January 11, 2010

Stock Index Chart Patterns - Dow Jones (DJIA) and Bovespa (Brazil), Jan 8, '10

Dow Jones (DJIA) index chart


Last week's analysis of the Dow Jones (DJIA) index chart was concluded with the following comments:-

'...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.'

True to form, the Dow made a new high of 10666 on Jan 7 '10 - this time accompanied by decent volumes. But the daily lows dipped below the 10500 level on each of the first four days of the week and the index sought daily support from the rising 20 day EMA. The 50 day EMA and the 200 day EMA are rising nicely, as the bulls resumed their efforts to dominate the bears in the new year.

The technical indicators are reflecting the bull surge. The RSI bounced off the 50% level, but note that it failed to make a new high. The MFI has moved up sharply above the 50% level. The slow stochastic has entered the overbought zone. The MACD has remained positive and just above the signal line, but is showing negative divergence like the RSI.

This rally can end dismally if the employment figures do not start to improve soon. "Until we focus on creating middle class jobs that are not dependent on the government, we will only be putting band-aids on the open, festering wound that is our unemployment rate", mentions this article.

Bovespa (Brazil) index chart


It has been a while since I looked at the Bovespa (Brazil) index chart. But that hasn't deterred the bulls from their upward march. A renewed effort by the bears to fight back during the last two weeks of Dec '09 was effectively repulsed.

The new year's trading began strongly and the index made a new high of 70937 on Jan 6 '10 with good volume support. All three EMAs are moving up with the index above them.

The technical indicators are not as supportive. The RSI is above the 50% level, but actually drifted lower as the Bovespa made a new high. The MFI has dropped to the 50% level. The slow stochastic has entered the overbought zone. The MACD is above the signal line and rising in the positive zone. But it is showing negative divergence - like the RSI and MFI.

Bottomline? Both the Dow Jones (DJIA) and Bovespa (Brazil) index chart patterns are looking bullish. The sporadic efforts by the bears to stall the bull rally have come to nought every time. Maintain trailing stop-losses and stay invested.

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