State of Dow Jones - Calendar Week 42 2021

Hi folks! Welcome to another part of the blog post series

State of Dow Jones

for

Calendar Week 42 2021

Part three already. This week has been incredible for those that invested into the Dow Jones. But how healthy is the current price development and what's the outlook?

 

Technical Chart for Dow Jones

Every "State of Dow Jones" blog post should start with the technical chart, so here we go (created on tradingview.com):
 


The Dow Jones managed to trade above its SMA 20 and also overcame the turquoise trendline / flag which happened to be at the 35 000 resistance level, which became a support shortly afterwards.

The index only knew one direction during this week - upwards. The current price movement stopped a few points above the old all-time high and within the upper Envelope band. On the daily time frame, the index now looks slightly overheated.

For now, the old all-time high around 35 631 holds, but it wouldn't be a big surprise if there was a small pull-back before the Dow tries to climb to higher highs.

The RSI is currently at 64,57 and it a good terrain (bullish, but "far away" from giving overbought signals).

 

Summary: Technical chart looks good, but a short break is expected before new highs can be reached.

 

Market Breadth Data for Dow Jones

Let's also look at the market breadth (chart provided by https://www.advance-decline.net):

The Advance Decline Line is far away from reaching the old highs - bearish divergence here. 
The McClellan Oscillator looks bullish in total because it remained so long above its zero line.
The McClellan Summation Index has advanced several days in a row and provides bullish signals.

Summary: Market breadth gives mixed signals here. Caution regarding the bearish signals coming from the Advance Decline Line. The McClellan indicators, however, send positive signals.

 

Market breadth for Dow Jones: % of members above their SMAs

 The market breadth data would not be complete without looking at how many percent of Dow Jones members trade above their important SMAs (chart provided by https://www.advance-decline.net):

Here are the numbers for the percentage of Dow Jones components that trade above their important SMAs:

  • SMA 50: Remained at 50% (compared to last week)
  • SMA 100: Rised to 56,67% (last week: 50%)
  • SMA 200: The total percentage of Dow Jones members trading above their SMA 200 is at 60% (was 66,67% last week).


1/3 indicators improved, 1/3 stayed on the same level, 1/3 declined.

This also gives a mixed picture, which is why we take another look at this data by looking at the last two months only:

 

While the index slightly advanced in this time window, the percentage of index members trading above their SMAs all declined. 

This can be a sign of weakness, but might also only reflect that we are just about to leave a period with weak seasonality. 

Summary: As long as all indicators are at at 50% or above, there is no need to worry. However, those numbers also don't indicate that we are about to see a strong rally.


Outlook

  • When looking at the next trading days, the Dow Jones looks slightly overheated on the daily time frame. Also, market breadth doesn't suggest that we will see a big jump or a rally start during the next days.
  • The middle-term outlook is good. Let's watch the market breadth data closely and see if we can detect any signs for big movements.




Comments

Popular posts from this blog

State of DAX - Calender Week 41 2021

State of DAX - Calendar Week 36

State of DAX - Calendar Week 38