Dow Jones continues to trade sideways…

By Sandy Jadeja 13:13 23- Dec -2008

After multiple mixed Buy and Sell signals the Dow Jones has continued to trade sideways. The last two weeks has not seen any progress and has frustrated both the bulls and the bears.

However we may have an indication to the next move as there appears to be an abcde pattern developing. So far the abcd move has completed as long as the index stays above 8347 which if broken could see a pattern failure with lower prices. The momentum index has not provided clear signals with follow through so far and the current signal has registered a sell with the index slightly lower.

If we climb above 8887 then it is likely that 9026 could be taken out with a reach for 9182. The 8811 resistance level has so far pushed the Dow lower forming a minor triple top pattern. If the Dow can break above this level then we could see a sharp rally take place into the early part of January 2009. This is an important juncture as quite often the first few days of the year can provide a signal to the direction for the year and therefore to see a positive 2009 we would like to see the market rally from current levels.

Overall we know that the market has lost -37% with lower highs and lower lows. This signifies a bear market of a larger degree and much work is required to turn this around into a bull market. For the intermediate term we do need to see the Dow break above 9660 to let the bulls take back control.

On a short term basis we have been trading in a channel which can be very frustrating as no clear direction can be ascertained until a clear break either above or below the channel has taken place.

Until we have more evidence or a breakout the week ahead is likely to be choppy and with thin volume at this time of year and could also see narrow trading range days until traders arrive back from the season holidays in 2009.

At best once could sit on the sidelines until such activity takes place or quite simply trade the channel as a support and resistance barriers for short term moves.

Sandy Jadeja is Chief Market Strategist for ODL Markets and founder of www.Spreadbettingtowin.com where he teaches low risk trading strategies and money management.