Monday, March 15, 2010

Dow Jones (DJIA) Index Chart Pattern - Mar 12, '10

The Dow Jones (DJIA) index chart pattern closed about 0.5% higher week-on-week but the index traded within a narrow band of 200 points and failed to get past the Jan '10 high of 10767.

An attempt by the bulls to push the index up to test and cross the previous high is very much on the cards. But remember that a failure to go past the previous high could lead to a bearish double-top pattern - a possibility that is present in the European indices as well.

The 3 months bar chart pattern of the Dow Jones (DJIA) index shows that the bulls are pretty much in control:-


The 20 day EMA is now above the 50 day EMA and all three EMAs are rising with the index above them. The volumes have been quite decent as well. The only jarring note for the bulls is that except for Thursday's trade, the opening and closing levels of trade on the other four days were very nearly the same - indicating indecision.

The slow stochastic is inside the overbought zone and looks like it wants to stay there a while. The MACD is rising in positive territory and is above the signal line. The MFI is above the 50% level and rising slowly. The RSI is also above the 50% level but has dropped after touching the overbought zone, and showing negative divergence.

Looks like the economic stimulus had a very positive effect on the stock market. But it was supposed to stimulate the economy, wasn't it? How well has it done that so far? This article makes several important points to ponder about what will happen when the economic stimulus eventually gets withdrawn.

Bottomline? The Dow Jones (DJIA) index chart pattern is looking quite bullish but is nearing its previous top, which could be a likely resistance area. This is not a time for gung-ho buying. Wait for the previous top to be convincingly cleared.

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