Friday, June 12, 2009

Dow Jones Industrial Average in June 09 - top or what? (Part I)

This is my attempt Part I to figure out the current, bizzarre formation on Dow Jones Industrial Average. Today it ended up 28 points thanks to the usual last hour mysterious push out of nowhere, but until then it was set to end very close to the unchanged mark.

As I said in my prior post, I don't think I've ever seen the 6 consecutive trading days of hardly any change from day to day, which resulted in "doji" candlesticks. Is this the sign of a top of the market, or a bottom of the market (I know, we're already off March low)?

First off the bat is the chart of Dow Jones Industrial in September 2008, right before the $700 billion bailout bill passed. Right before the big tumble. Even though September 2008 was not the market top for the year (that was back in May), it was when all started to collapse and that's why I've picked it. Is the current formation a topping action?

As you can see, September 08 chart has no resemblance to the current June 09 chart.

- RSI does fluctuate.
- Index movement is zig zag, not flat-lining.
- Index moves up and down huge.
- Volume varies, and money flow varies.
- Stochastics moves quite a bit, not flat-lining.

So my tentative conclusion is that the current formation does not indicate a top. I'll look at Dow Jones Industrial's October 2007 market top next. Stay tuned.

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