Dow Straddles the Fence

It's sink or swim for this floundering beast
The line in the sand is drawn and investors can no longer afford to sit on the sidelines. The Dow's upcoming move is sure to produce a dramatic scar… one that will force many investors into hiding, licking their wounds in preparation for the next battle. Only one winner can emerge, leaving others behind to lick their wounds… but who will it be?

Let's head to the charts…

 
Source: Bigcharts

If history is to judge the outcome of this week’s activity in the marketplace, then the bulls would have the upper hand. Let me explain…

Without getting too deep into the technical argument here, I would like to draw your attention to the MACD indicator found at the bottom of the chart — below the price. You see those intertwining lines of blue and red? Whenever they cross paths, a signal is given.

Specifically, when the blue line crosses above the red one, we would consider this a buy. Likewise, when the blue crosses below the red line, it’s indicative of a sell recommendation.

The chart you’re seeing represents the Dow Jones Industrial Average (DJIA) on a 5-day, 15-minute chart. I have marked three buying points, all represented by green markers. The most recent 15 minute time frame shows an MACD bottom, which is signaling us to buy right now.

Talk about perfect timing…

Now, let’s look at the pricing patterns of the Dow itself during the time horizon mentioned above. After most rallies, the stock, or index in this case, will roll over and trend in a sideways fashion. Think of this phase as a momentum builder. Remember how hard it was as a young lad to push down on a coiled spring? Once you eased up on the pressure, the spring would unload like a canon and quickly fly into the open air with incredible force and velocity.

Well, the Dow is now being squeezed from both the bulls and bears. It goes without question that they are desperately trying to get each other to tap out and give in.

This is what those two sets of slanting lines are all about on the price chart above. They represent the battlefield where opposing views come to determine the future of price itself. With the help of some key indicators such as the MACD, it’s easy to see how the bears may yield this battle and live to fight another day. But for the next week or so, it’s probably a safe bet to play the bull.

In my estimation, the Dow should have no trouble reaching 13,100 by Friday.   
 

Good investing,

Stanley Barnes
Editor, Charts of the Week