A Technical Look at the Dow Jones
The recent declines across stock market indices, like the US Dow Jones, UK FTSE 100 and German DAX 30, have experienced a somewhat quick reversal. In fact the indices are now moving up and appear to be gathering momentum.
During the aforementioned decline the indices reached the price support targets as expected. A number of technical indicators point towards the market reversal looking positive and that would suggest further medium-term gains, provided that the positive short-term momentum continues.
Looking at the US Markets, with the downside move completed the Dow Jones now may be in the first stage of an ‘ABC Correction’ to the upside. (According to ‘Elliot wave theory’, an ABC Correction usually manifests itself immediately after the five-wave pattern and normally consists of a strong-bear-wave, a weaker-bull-wave, and finally a strong-bear-wave. If you are share trading or trading CFDs this is a common technical indictor that many investors use).
According to City Index, “For the Dow Jones, a five-wave move at the 10,035 level has propelled the US index higher which may suggest that the 10,630 level could be re-tested. As long as the Dow stays above 10,250 in the short term, the odds increase for the bullish momentum to continue.
“The Dow Jones is currently above its 20-day-moving-average and, if you add the bullish momentum to the equation, that signals that the short term and intermediate time frames are now also looking bullish.”
If you are day trading or trading the financial spreads markets be careful though, after the ABC correction the bears may be back with a vengeance and we could see the Dow fall quickly.
