Friday, August 12, 2011

Market Watch: DJIA

We got the break as anticipated and the DJIA is above 10,800 as requested. So, now what?You can see on the chart how the Dow Jones industrial average fell off a cliff at 12,000. It crashed through prior support at 11,500 as if it never existed before going all the way down to its 52-week low of 9936.62. So, it seems to me that the next level of resistance for this index is 12,000.

Will it make it back that high? There is a case to be made that it will. You can see the schizophrenic stochastic turning up from deeply oversold that area with the red line just beginning to separate from the blue line. Also the volume is double the 50 day moving average of volume. So, we have a case where the momentum has room to go and the volume behind it is strong. Look at where the index was when the stochastic peak back in July. The index was well above 12,000. Now everything could crash again, but with the VIX at 39 I still feel safer buying than I do selling. Of course I am comforted by knowing we can always buy in partial positions with very tight stop regardless of what the market does.

Yesterday we picked up some Goldman Sachs. Today we will add to that on strength and will look to possibly get into IBM.

No comments: