Dow Jones rises on strength…

By Sandy Jadeja 09:28 4- Aug -2009

Having reached the price objective of 9093 at the expected time frame of July 30th the index has shown further strength.

This places the Dow Jones in a situation where we may see higher prices in store. 9366 – 9422 has now come into sight and is likely to see the index aim for this area for this week ahead or into the following week.

We now know that with the current price action, this has created a strong momentum taking out resistance levels along the way. On both the short term and intermediate term time frames the signals have turned from bearish to bullish. Caution is advised here though as past price patterns have shown that at extreme moves markets can reach exhaustion points. Various technical indicators are now showing signs that the Dow may be reaching such an exhaustion point.

Traders are also observing that the index has traded away from its 20 period moving average and this could also point to a correction in store for the weeks ahead. As noted previously the month of August has been know to see weaker prices so it may be that the current rally may just be on the verge of the expected correction.

We shall await further information from the market itself to confirm that a short term high is in place. The first point that should be recognised is if the Dow breaks below 9110 – 9100. If this low is taken out we shall assume a high lasting several days to several weeks may have formed. We would also be looking for the momentum indicator to head back lower and if a sell signal occurs this would place the index in an intermediate term bearish position.

Until both of the above scenarios have been satisfied the Dow Jones remains bullish for short term traders and neutral for longer term traders awaiting a pullback.

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.