Friday, February 19, 2016

Market outlook : Dow Jones (19 Feb 2016)

Two weeks ago, the Dow retested the 15,500 level and quickly bounced higher.  Last week, it tested the 16,500 resistance level and fell back.  Both moves make sense when you consider the bigger picture.

  To re-review:
  • The market has topped and is generally moving lower based on the rounding top pattern and the downward movement of the 40-week (200-day) moving average (blue lines).
  • In the shorter-term, things are moving sideways between 16,500 and 15,500.  That's a pretty broad range leading to some quick, big moves both up and down.
  • We still think a move below 15,500 would be bad and a move below 15,000 would be worse from a technical damage perspective.
  • Assuming no big, non-technical event influences things, we'd expect the market to continue moving sideways until the 200-day moving average pulls into range.  At that point, the market will feel more pressure to move lower.
The most important thing to remember at this point is that we are currently in a downtrend and we need to respect that downtrend until it is decisively broken.  This will be true at least until the Dow climbs back above the 200-day moving average.

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