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DOW JONES Index

Well, I said last time that it has surprised me to see the Dow push so strongly above the 10,000 level before the end of 2009 but it did. At the same time it hit the 50% Fibonacci retracement from the low so it is not surprising that it stalled. In January it then retraced to test the important 10,000 level from the top.

In February it managed a spike through that support over a few days but importantly managed to close the month above 10,000. The market gave the 10k support a good test and it failed to break back below that level convincingly so it is not surprising that we have seen March in a more bullish mood with a push up to a new high this year. The next resistance level will be the 61.8% Fibonacci retracement level at around 11,340 and if that is broken I see no technical reason why we shouldn't see a push up towards the 14,000 level over the coming months.

Looking at the daily chart below, last time I said "... it is now highly likely that a period of sideways movement will be seen over the first few months of 2010. In the shorter term you can see from the daily chart that a retracement is now likely back to the red support line. However, even if the line is hit it will still be above 10,000 by the time the index reaches it. From there on another bounce is on the cards."

Daily chart from end of 2009 (below)

The chart below shows the price movement since then. It didn't quite pan out the way I anticipated. It certainly retraced to the red support line but then broke through with considerable momentum. However, as mentioned above, the 10,000 level was brieched briefly but then held to provide the next push up. An inverted Head & Shoulders pattern also assisted the up move. The index is now overbought and a consolidation period or retracement is likely before the next big move.

 

Tip: Support & resistance levels can be broken intra day with far less meaning than a close above resistance or below support. Trend lines can be pretty subjective at times and often the best test is to just ask yourself if it looks right and makes sense.

 

FTSE 100 Index
The FTSE as always tends to mirror the Dow. You can see that the long term trend line (in red) has held beautifully and provided support in February allowing the Index to reach a new high for the year. You can also see the inverted Head & Shoulders formed between January & March which again, reflects exactly the same pattern as the Dow.