A Quick Look at Where We Are

Jan 28, 2008: 12:19 PM CST

Here’s a quick Monday afternoon snapshot of the current US Indexes and what may be in store for this potentially volatile upcoming week:

First, where the Dow Jones Index stands:

  • 2008 has gotten off to a very bad start
  • January is on course to set new lows on the index, which is bearish due to the potential “January Barometer” effect
  • Price made a new momentum low
  • The moving averages are in the most bearish orientation possible
  • Price appears to be making a bear flag, which potentially could be a failed flag (due to today’s action)
  • Price was rejected twice equivocally at the 11,600 level, creating a temporary bottom (or support)
  • The two long shadows (wicks) formed by these candles are bullish patterns
  • Volume is surging on the index and the respective ETFs. Capitulation? Or aggressive accumulation?
  • Bulls would love to see price clear 12,600, breaking above the falling 20 period moving average
  • The daily trend is clearly and confirmed down

Onto the weekly Dow Jones:

  • A momentum divergence (sell) has been resolved soundly to the downside
  • Price made a new weekly momentum low
  • Price attempted a test of the 200 period weekly moving average, which found support
  • Despite all the volatility of last week, the Dow managed to close the week positive (bullish)
  • It appears that a counter-swing up (buy swing) is forming which could take price higher
  • A “death cross” of the 20 and 50 period moving averages seems imminent, but has not happened yet
  • The weekly chart is beginning a new confirmed downtrend
  • Price is below the levels where 2007 opened

Let’s take a brief look at the US Dollar Index:

On this weekly chart, we see the most bearish orientation possible of the moving averages.

We also see significant resistance by the 20 period weekly moving average

A swing divergence is forming, in which the index could traverse the average, but the trend is still uniformly down, and interest rate cuts don’t help this very much.

Should the Federal Reserve cut rates Tuesday or Wednesday at their scheduled meeting, then this would add further pressure on the dollar, but would probably help prop up the US Indexes a little more, further confirming the perceived up-swing in price which seems imminent.

Also, recall that Amazon (AMZN), Google (GOOG) and other heavyweights (including various Dow Jones components) will be releasing earnings this week, so – despite what the charts are hinting at – anything can happen so it may be best not to get too aggressive until some of those unknowns clear.

It seems like this week could be a win for the bulls, but let’s remember that any upward swing is only a counterswing, and we need price to stabilize before we start calling for the bottom or the birth of a new uptrend.


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Trade and invest safely this week.

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