Sunday, April 20, 2008

DJI Chart

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As I have mentioned in my last "DJI Volume" post the DJI high volume surge on April 11, 2008 had pushed the market higher. My point that the decline started on April 8, 2008 could be a short lived (see last paragraph in my "Technical Analysis" post on April 6, 2008) has been confirmed by the strong recovery - the Nasdaq 100 and DJI indexes have broke the February 2, 2008 high (the S&P 500 index is still below. )

I think the recovery trend has defined itself very clearly. For those who still believe in recession I may only say – yes…, maybe…, yet I do not think now. I do not look for a year ahead. Maybe, we are in the global recession and the stock market will be lower in a year… However, I do not think it is going to happen "tomorrow". First, I think we have to see some recovery as reaction on January and March huge volume release, then we will see – that is why we analyze charts on daily basis.
Taking look at the current chart I may say that result of my technical analysis based on the NASDAQ 100, DJI and S&P 500 is bullish. All my technical indicators on all three indexes are positive: VIX is dropping, SBV and advance decline oscillators are moving up, average volume is lover then in January – March period, RSI and Stochastics are above 70 and 80 respectively.

One thing that disturb me is that I start to see growing MVO(5,25,3) on the 60-day chart, which reveals me that we have growing volume in relation to the average volume over the last 25 trading hours. The same as on April 11, 2008 I may say that this volume may push the market in the correction. Again, I would not expect to see the correction until MVO is back to the zero line – only then I would consider the increased possibility of the correction.

Overall I would say that I would expect the indexes to move higher or move flat, to the point when I see MVO(5,25,3) on the 60-day chart equal zero. Then I would check the chart to consider the possibility of the correction.

The most positive factor in the recent correction down (April 8 – 14, 2008) for me is that the stock market was pushed into this correction by the big volume generated during the indexes up-move on April 1st, 2008. The big MVO could be noted on all indexes including NASDAQ 100, DJI and S&P 500. However, the stock market was reversed on the mach smaller volume surge during the index down move on April 11, 2008. The only big negative MVO could be seen in the DJI sector on that day. That tells me that the stock market is in the stage when the big volume is required to push it down and much smaller volume is required to reverse it back into up-trend. The "news lowers" and "news followers" could notice as well that the stock market started to react on the positive news much stronger then on negative news… All of this I consider as confirmation of the development of the recovery.


1 comment:

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