Brief Index Overview

Sep 28, 2007: 10:05 PM CST

The week of September 23rd – 28th left us in a more favorable technical position on the index that bears were hoping. Price consolidated – through time – and actually added to the gains from last week’s reaction the Federal Reserve’s ‘surprise’ decision. At least temporarily, the bulls have dominated the technical landscape, gaining significant ground over the last two weeks from the retreating sellers or bears.

Let’s review this development graphically:

  • New Momentum High in Price (indicates higher prices are likely yet to come)
  • Test of all time high is only 105 points away – seems very likely at some point (maybe not immediately)
  • Moving averages now showing bullish pattern (20 above 50 above 200)
  • Price is in a confirmed uptrend
  • Support seems well-established at 13,700, 200 points away
  • We may be entering a new ‘trading range’ environment as price consolidates recent gains
  • Volume action declined steadily as price rose – this is a negative (bearish) divergence
  • The Bollinger Bands (shaded gray area) are extremely divergent, reflecting anticipated consolidation
  • The indexes have taken on a bullish “feel” visually on the chart

Dow Weekly:

  • Price in visually appealing, and self-evident uptrend
  • Price reacted (bounced) off 50 week moving average
  • Price is testing all time highs
  • Momentum is forming a weakened pattern relative to the previous price swing (divergence?)
  • Volume is lighter over the last month compared with previous (bear) months of July & August
  • Moving averages are in the most bullish formation possible (space between 20 and 50)
  • The last two times price had sharp decline, price rallied hard to make new highs quickly.
    • Will it happen again?
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