Before the usual chart round up of in this case the Dow Jones, first…a little story, so that way in future you won’t always act before thinking things through first.
About 2 years ago I learned my lesson the hard way and the way to go about doing that is when you start listening to the news about the markets (especially the indexes). Right at that exact moment it’s when the market gives you a thorough beating. I don’t mean to say that all news is bad, but I always want to see it reflected in the charts. The market in this case tells the truth not the news.
Please read the previous two sentences again, because that is in a nutshell why people do bad trades. They hear some good news, buy a stock and get beaten most of the time.
So when so many people (news) told us for 11 months that the Dow Jones would sink into oblivion. What do you think will happen when I suddenly start hearing news about several markets improving around the world. I start thinking, well if its like that, my guess would be that the Dow Jones and other indexes would go down.
So I took my crayons and started doing my Technical Analysis and trying to see for myself what kind of story the chart could tell me? Will it be a fairytale or rather a horror story leaving me with many restless nights? I’m sure the latter isn’t on everyone’s wish-list?
What does the chart tell us?
When looking at the chart of the Dow Jones Industrial Index we can see that the long term trend has been broken a while back on the 22th of January.
Everybody was waiting for this and predicting this for months, but the index kept going for 11 months. What a laugh.
Now the index climbed back to the (green) resistance and bounced of the MA50 and also off the resistance line I have drawn. So when the Dow Jones is not able to take out the MA50 and keeps making lower highs, it doesn’t look to good.
I also drew a trend line from the earlier high from back in January to the most recent high from February. Should the index manage to stay below this level or bounce down from it, it could mean down is where we need to look?