Market Analysis

The Curious Chart of $DJIA

The $DJIA chart is telling an interesting story, technically speaking that is. Frankly not sure what the message is quite yet, but I find it fascinating hence it might be of interest to share.

First of all, note a behavioral set of facts I’ve pointed out on twitter: On Monday $DJIA again tagged its January 2018 highs and has again rejected. All rallies to new highs have been selling opportunities. All rate cuts have been selling opportunities. Lower high in September, risk of a double top:

We see several relevant trend lines on the chart above and I could discuss these here, but I want to highlight something completely different and that is: Why is $DJIA rejecting these price zones above 26500?

Well, as it turns out, there is a technically relevant resistance point precisely at the October 2018 highs, the 2.618 fib from the 2009 lows and 2007 highs:

26948 on the futures contract. In fact, what’s notable here is that $DJIA has tried 5 times to get above that zone on a monthly basis and has failed every single time to close above it by month end. Even the current October highs have tagged there and now rejected again.

Here’s a close-up for clarity purposes:

Now if you’re bullish you can make the case that on the next tag $DJIA perhaps can break through and leave the line in the dust and proceed to break out.

But there’s another consideration here and that is $DJIA has formed a wedge pattern and that is again at risk of breaking to the downside:

Judging from the chart this pattern will come to a conclusion either way either this month or next, so we’ll have our answer by then.

If it were to break to the downside what’s the ultimate downside risk?

This chart here suggests an eventual price target zone below 20,000, i.e. the .382 fib which could be massive support and set up for a big rally.

But note no support has been broken and the 2009 trend is still intact as well. As I stated this weekend: Decision time is approaching and a trade deal may be critical for a breakout to be sustainable.

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Categories: Market Analysis

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