Stock Index Chart Patterns – Dow Jones (DJIA) and FTSE 100 – Dec 24, ‘10

Dow Jones (DJIA) Index Chart

The Santa Claus rally continued in the chart pattern of the Dow Jones (DJIA) index. The index breached the 11600 level on intra-day basis and closed the holiday-shortened week at another new high of 11573 on Dec 23 ‘10.

Volumes have thinned out considerably, which isn’t of great concern because of the long weekend. But the technical indicators are hinting at a correction, or at least a consolidation. The MACD is positive and above the signal line, but has made a lower top. The slow stochastic is well inside the overbought zone. The RSI is on the verge of falling below the overbought zone.

The bull market is under no threat, but the index is looking overbought. Stay invested, with trailing stop-losses.

FTSE 100 Index Chart

The current rally in the FTSE 100 index chart pattern from the Jul ‘10 low has already lasted 6 months. Last week’s bearish possibilities were ignored as the index rose smartly to close above the 6000 level for the first time in more than 2 years – but on low volumes.

Bearish concerns haven’t gone away. The MACD is above the signal line and rising in positive territory, but failed to reach a higher top. The slow stochastic is inside its overbought zone. So is the RSI.

The index is looking overbought. A short period of correction or consolidation will strengthen the bull market. But corrections do not happen because we may want them to happen. Till then, keep your seat belts fastened and enjoy the ride.

Bottomline? The chart patterns of the Dow Jones (DJIA) and FTSE 100 indices reached fresh new highs last week. Both indices are beginning to look a little overbought. Stay invested, but maintain trailing stop-losses to preserve profits.