Index Quick View

Aug 25, 2007: 11:41 AM CST

Traders were relieved to see the recent upswing in the markets, leading to a weekly gain of 2.29% in the Dow Jones Index.

I wanted to make a few quick points from a technical analysis standpoint regarding the current price position of the Dow and similar pattern of the S&P 500.

Volume declined significantly during this rally, calling it into significant question, and overhead resistance may prove to be a spectre that halts the recent price advance.

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In both indexes, observe the following:

Volume has declined on the recent ‘swing up’ in price

A “Measured Move” on the upside has occurred in both indexes, indicating price may reverse.

Price broke through the falling 20 period MA – a bullish sign – but must break the more significant 50 period MA before we can get super bullish again.

The trend is still confirmed down, with any rise generating a fresh opportunity to establish a short position. The current trend of the daily charts in all four major US indexes is ‘confirmed down’ and will be so until a higher high, and higher low occurs (which is – at a minimum – weeks away).

We see a positive momentum divergence on the S&P, but only a neutral divergence on the Dow, leading to mixed signals.

Volatility has declined relative to the last two weeks (a welcome sign for most traders).

Be safe out there this week.

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