Dow Jones retreats at resistance level…

By Sandy Jadeja 09:16 6- Oct -2009

The Dow Jones has seen a minor retreat from a resistance level of 9805. The real question is will the index fall hard from here?

Of course many traders have been anticipating a correction from the March lows but have not had a tradable move just yet. So far the index has managed to maintain the rally with a strong foothold. What is apparent is the ABCD formation which in the current context can be viewed as a bearish pattern. With the index in a bearish pattern at a resistance level should provide an early warning signal.

However before getting overly bearish we would need to see the Do trade below 9425 to indicate that a high that should last at least a few weeks is in place. Until this price has been breached the index may still be in a position to reach for 10335.

Also on the weekly chart we notice that there is still no sign of a momentum sell signal just yet. In fact the indicator is still fluctuating at high levels indicating that the Dow still has some strength left to carry the index higher.

We would need to keep a close eye on the index over the coming week or so as any sudden moves could see a sharp move either to the upside or downside. October is notorious for volatile moves and hence strict money and risk management should be adhered to.

The daily chart momentum indicator is close to providing a Sell alert and therefore if we do see a turn lower the odds are that the index may see a swift move to the downside. But until we have this scenario take place we can still assume that short to intermediate term the index remains bullish but with a cautious stance.

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.