Fly-By of the Dow

Dec 11, 2007: 11:52 AM CST

Before the Federal Reserve announces their decision, let’s take a very quick look at the current technical picture of the Dow Jones Industrial Average:

  • Price is just under 400 points away from all-time highs.
  • Price made a new momentum high (annotated NMH in the bottom oscillator)
  • There is a convergence of support from all three key moving averages and a horizontal trendline which should thwart selling pressure (unless the Fed actually raises rates)
  • Price is above all key moving averages
  • Price carved out a new swing high
  • Price is still in a confirmed downtrend on the daily chart, though very close to switching back to an uptrend
  • We see Non-Confirmation by Volume, as higher prices have been met with lower volume. This is temporarily bearish.
  • Price is at the top of the daily Bollinger Band (bearish to neutral)

Of course, all this could change when the Federal Reserve announces their rate policy later.

A cut of .50 should cause price to rocket through the Bollinger and potentially make new all-time highs by the end of the week.

A rate increase will likely take price beneath key support, though this is highly unlikely and would surprise about 90% of traders/investors.

It looks like the market has already discounted the expectation of a .25 basis point cut by the Fed.

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