One red month out of the last 11 months. Three red months out of the last 20 months. Quite the streak, unmatched really in recent years. Many continue to make the case that this story won’t end any time soon. Maybe they are correct, yet the charts make clear the risk/reward for uninterrupted upside is simply not there.
In fact, a reconnect with the middle Bollinger band could happen quickly at any time. None of this would mark a bear market or crash, but with about 1,500 points to the downside such a move would surely make for some great trading and still, those 1,500 points would keep us above the February lows and likely provide a nice buying opportunity into the 4th quarter.
The last time the $DJIA hit its middle Bollinger bands was in November 2012 conveniently coinciding with the begin of the Fed’s latest QE program. It is then when the 20 month streak began. It is in October of this year that QE is likely to end. As we are approaching month end with the $DJIA showing a weakening RSI and quite the wick (so far) the case for the story to be never-ending seems rather shaky into August and September: