On Friday we mentioned how the Dow Jones Industrial Average had hit 14,000 again since the financial collapse began. We also mentioned how we thought this level would become resistance and how the market may take a breather here before continuing its move up given its weakening technicals. As it stands the market is very overbought and losing upward momentum. Today I figured we take another look at the charts in order to determine wether this is a short term speed bump on our way higher or if this move will take us back down to 13,500 or even 13,000. So lets get to it:
Here we have the chart for DIA (the ETF that tracks the Dow Jones Industrial Average). As we see the MACD’s signal line actually edged closer to a bearish crossover today while the RSI still sits very near overbought levels. I believe we will see a bearish cross over of the MACD within the next week so be ready to put on your bear hats (at least temporarily) as we head back to 13,500 and test it as our new support level given its prior role as resistance. Be sure to hedge your winners as this is sure to be a bumpy ride. If we do continue to move downward I suspect the move to 13500 will take about a month to take place as that is the amount of time needed for the the support line for this last move up to move towards 13500 which was the previous resistance level.
Comment your thoughts.