Dow Jones in consolidation…

By Sandy Jadeja 09:21 27- Oct -2009

Over the last week the Dow Jones index has attempted to break above 10,100 six times. Each attempt has been met with resistance and pushed the index lower.

The recent break below 9940 is suggesting that a short term top may be in place. This is not to say that a major decline is about to start but rather caution is advised for Long positions.

In order to accept that a decline could be ahead we would need to see the index decline by more than 5%. There is a support level at 9693 – 9631 which would need to be cleared for the bears to take control again.

We notice that there is no reversal signal from technical indicators just yet on the intermediate term charts. With this in mind a break below 9500 is required. But this weeks price action could bring this level to a higher number closer to the 10,000 mark.

There is still the possibility that if we do see a move lower it may just turn out to be a correction against the main uptrend which is still intact technically. The follow up to this scenario would be that the turn window for November the 30^th may still be valid. If this is the case then 10,335 may still be on the cards.

We did expect there to be some struggle at the all important 10,000 level and this is exactly what we are getting on the table at the present moment. For the short term traders there needs to be a clearance above 10,100 for a bullish move and if we see declines below 9856 then we would be looking at 9774 – 9693 as the initial target with lower support levels at hand.

Next week should provide a clearer picture to the intermediate term outlook and we await further price action to dictate the next move.

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.