Dow Index Rally Almost Finished

April 14, 2016

The Dow Index just keeps plugging higher…but all good things must eventually end. So let’s review the daily chart to see where the good times are likely to end.

DOW DAILY CHART

The Fibonacci fan shows that the move higher over the last couple of months has generally been contained within the 61.8% and 76.4% angles. It is only recently that price has started to drift away from the 61.8% angle, indicating some weariness creeping into to the uptrend. Nevertheless, the price continues to climb the proverbial wall of worry.

So, where is this uptrend likely to terminate?

The horizontal line denotes the November 2015 high at 17977…and I believe price is set to make a false breakout top just above that level.

The low in January 2015 was a higher low.  And in the event the price should trade above the November 2015 high, then it will be followed by a higher high. After that, I expect a bold move back down, which  eventually sets up another higher low. As outlined my previous analysis, I am targeting around the 15700 level for that higher low.

The Bollinger Bands show price having one last lash at the upper band, which should see price push further into this band before a reversal back down takes place.

Technical Indicator RSI looks likely to set up a triple bearish divergence on this next high. That often leads to a significant move down…and that is certainly my expectation.

Also, the MACD is currently marginally bullish but should set up a bearish divergence on the coming high.

Although a high appears imminent, this is not the beginning of the next leg down in a big bear market. However, by the time the next higher low forms it will certainly feel like it. 

Austin Galt is The Voodoo Analyst. I have studied charts for over 20 years and am currently a private trader. Several years ago I worked as a licensed advisor with a well known Australian stock broker. While there was an abundance of fundamental analysts, there seemed to be a dearth of technical analysts. My aim here is to provide my view of technical analysis that is both intriguing and misunderstood by many. I like to refer to it as the black magic of stock market analysis.

My website is www.thevoodooanalyst.com 

 

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