Index Chart Check on Multiple Timeframes

By | June 20, 2015

On Monday the DJIA closed below where it began the year. In that session the major indices tested key levels of either horizontal or ascending trend line support. The tests were successful and the indices went on a tear for the next three days, with the week’s high to low range on the DOW and the S&P measuring about 2.5%, and over 3% for the NAZ and the Russell 2000 index. Friday we saw the “healthy” pullback that’s required after a sharp move higher. It was healthy in the sense that the S&P dropped half a percent and volume was about 36% greater than the 50 day moving average of volume, the largest volume move since March. I don’t like retests of descending trend lines, like the ones on the DOW and the S&P, they invite lower prices, unlike horizontal trend lines which stabilize them. These indices need to recover quickly and take out last week’s highs. A protracted readjustment on these charts will be a drag on the NAZ and the Russell, the indices that have been supplied leadership.
On the weekly charts the Russell and the NASDAQ formed large white candles and continue to track higher. The DOW closed near mid-candle range and in mid-channel range, while the S&P 500 initially dropped below the uptrend line of its rising triangle, but managed to close back inside the pattern border.
Ideally we see the same action next week that we saw this week. That is, early weakness and then further strength, but maybe this time right into the close on Friday afternoon.

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