Dow Jones makes a sharp reversal…

By Sandy Jadeja 09:07 21- Jul -2009

We previously noted that the Dow Jones had been approaching a reversal “Time window” between July 13th – 14th. The index made a low on July 8th at 8087 and rallied sharply higher for a +9% gain.

As the index had not reached the expected price target of 7958 there were early warning signs that the move down had been running out of steam and that a reversal may have been at hand. This scenario had indeed occurred and surprised the bears by taking out some minor overhead resistance levels.

We were looking for the Dow to clear 8235 and this opened the door for a move towards 8708 – 8783. Currently the index is a hairline away from the June high of 8877.

If the Dow can hold above 8660 then it is possible that more upside could be in store for the remainder of July. The fact that the momentum index has also reversed and provided a Buy signal adds weight to the strength of the recent move.

However, both the momentum indicator and the price pattern are bullish only on a short term time frame. The intermediate term time frame is a touch away from turning bullish and the longer term time frame is still bearish. This would actually put the current position into a net sideways mode until further price action provides clues to the overall direction.

There is also a time spiral for July 30^th which may now be looked at as a potential for a high if the Dow continues moving higher. A break above 8877 could see the Dow target 9093.

The month of August is usually seen as a bearish month so we may be close to approaching resistance rather than a continuation of the current upward trend. At best we may make a minor new high which may see stops being taken out followed by a resumption down towards support levels.

The week ahead looks to be an interesting one for the Dow Jones.

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.