Where is the DJIA going next? Of course no one has a crystal ball, but since it's V bottom at 6440-ish the index has rallied on cooked books and light volume. Sometime when the index makes triple digit gains day after day and it seems like it will never stop. It will! It did! But when you get myopic, which is easy sometimes it's nice to take a look at the big picture.
Look at the three year chart of the DJIA. you can see the top at 15,000, then the stair step decline with local tops at 13,000 and 12,000. See if you can make out the triangle consolidation from roughly 8000 to 10,000 between October of 2008 and February's of 2009. Chart theory would predict a big break from that pattern one way or the other and that's exactly what we got.
The break was to the down side of course and now we want to pay particular attention to the rebound. Do you see how the rebound is flatting out and rolling over i.e. topping out, just shy of 9000. Check it out! If it pans out this way it will be lower high or just another step in the downward stair case. Notice that as this index slows the volume is drying up. Roll overs occur under these circumstances. Will it now, I dunno. Can they can keep it aloft here and do they want to. Remember Q1 earnings are over mid year reports and bonus are come around. Mutual fund money managers always bring the market down in early summer to maximize the rebound and their bonus. You've heard "Sell in May and go Away"! what month are we in?
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