• 262 days Will The ECB Continue To Hike Rates?
  • 263 days Forbes: Aramco Remains Largest Company In The Middle East
  • 264 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 664 days Could Crypto Overtake Traditional Investment?
  • 669 days Americans Still Quitting Jobs At Record Pace
  • 671 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 674 days Is The Dollar Too Strong?
  • 674 days Big Tech Disappoints Investors on Earnings Calls
  • 675 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 677 days China Is Quietly Trying To Distance Itself From Russia
  • 677 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 681 days Crypto Investors Won Big In 2021
  • 681 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 682 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 684 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 685 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 688 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 689 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 689 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 691 days Are NFTs About To Take Over Gaming?
Tesla Struggles To Compete In European Market

Tesla Struggles To Compete In European Market

Tesla continues to catch the…

Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

  1. Home
  2. Markets
  3. Other

Dow Pop And Drop Top?

The Dow hit an all time high today of 17221 which occurred shortly after the Fed meeting. Many readers will know that I have been looking for a pop into top around 17200 which flushes out all the stops that had built up above the 17th July high of 17151. Recent tops in August and September would have taken out some stops but the move today would have really nailed them, so to speak.

So, with the coast now clear, it's decision time on where the Dow goes from here. Does it follow through with conviction to the upside or is it time for a healthy correction and possibly something more? Let's investigate beginning with the daily chart.


Daily Chart

Dow Jones Daily Chart

Firstly, I have added the numbers 1,2,3,4 and 5 to denote the broadening top that we've been following. Today's move to a new high may well be the final piece to the puzzle.

I have added Bollinger Bands which shows price moving away from the upper band towards the end of August. It then hit the lower band and has subsequently rallied back to the upper band in the last couple of days. This toing and froing between the lower and upper bands is consistent with a trend change in progress or a consolidation before a trend continuation. Which one is it here?

I have added a Relative Strength Indicator (RSI), Stochastic indicator and Moving Average Convergence Divergence (MACD) indicator. A top forming here would be accompanied by triple bearish divergences in all three indicators. Hmmm. I'll take a stab that this is a trend change in progress!

I have also added a Fibonacci Fan which shows this surge into a potential point 5 of the broadening top to have just clipped the 50% angle. A nice bit of symmetry there.

Also, today is 60 days from the last major top on 17th July. This is a key Gann timing period. While not the be all and end all, it is noteworthy.

Many readers will also know that there are bearish divergences on the longer term weekly and monthly charts. That hasn't changed. In fact, let's quickly look at the weekly chart containing the RSI and MACD indicator just to show the fourth bearish divergence in both indicators. A rare and extreme quadruple bearish divergence. That is providing price does indeed top here of course


Weekly Chart

Dow Jones Weekly Chart

I have been looking for a pop and drop top to end this uptrend. Today looks like the pop. I have acted accordingly taking out small short positions. All that is required now is the drop which will see me add to short positions. We'll know shortly. No pun intended!

 

Back to homepage

Leave a comment

Leave a comment