Dow Jones Industrial Average Is Walking Out Its Downtrend

It closed up today and the week so it’s following through the big shoot up the other day. As we can see that on the daily chart, it’s in short-term over bought condition now. It’s slowly walking out the downtrend line, but we should be cautious as the volume was not confirming.

If you have significant equity positions in your portfolio, any rally into 9,500-10,000 zone can be your opportunity to lighten up and preserve your capital during this bear market.

Market Rockets Back

All major markets rocket back over 10% today. A lot of short squeezes probably. I don’t believe that there’re so many longs that couldn’t wait and jump on the buying spree.

On the monthly chart of Dow Jones Industrial Average (INDU), you can see that we’re approaching previous low, which occured 5 years ago. Have we reached the bottom yet? Not sure, but we might be near the bottom judging by the previous low, which is the current support level.

The looming global recession is on everyone’s mind, so it’s possible that the support may not hold. There will be many ups and downs around that support. We can certainly play longs at the support level and shorts at any rally near 9,500/10,000 zone. The markets are currently in oversold condition and volatility will remain high as seen in the past a few weeks.

On the 3-month daily chart, INDU is moving away from the oversold condition. If we don’t see a follow through on this snap back, the downward trend will continue. 8,000 looks like a good support for now and the more fight between the bears and bulls around 8,000 the stronger it will become. If the downtrend continues, 7,500 is the next major support to watch.

Melting down …

The melt down continues. We have broken 9000 level. Looking back 10 years, the support level is around 7500.

Dow Jones Industrial Average is at oversold condition, but with current credit crisis still spreading and running its course, any technical bounce is possible but would not last long.

Unless you have significant cash positions, wait in sideline. Cash is king in this juncture.