Forecast Dow Jones Index - daily chart 8th November 2010
A quiet day for the Dow Jones Index on Friday which ended the week and the trading session marginally higher, up just 9.24 points on the day or 0.08% at 11,444.08 and closing as a small doji cross candle. Friday’s subdued price action came as no great surprise following Thursday’s surge higher as traders and investors closed positions and banked profits ahead of the weekend. The small doji candle thus created suggests a possible short term pullback and re-tracement lower in today’s trading session, an analysis which is further confirmed by the volume, which was higher than average at 211.7m on the day but with no consequent rise in price which is always a warning signal that the market is likely to run out of short term momentum. To put this into context Thursday’s volume was slightly higher at 234.7m with the index gaining 224 points on the day, so clearly there is some short term weakness. From a technical perspective the longer term outlook for the Dow Jones index still remains firmly bullish as it continues to trade above all four moving averages with the 9 and 14 day in particular a strong feature of the recent trend from early September with both having held firm throughout. The 40 day moving average continues to point sharply higher and with the 200 day also beginning to incline upwards this is adding further weight to our analysis.
The fundamental picture for equities continues to be dominated by US monetary policy from the FED who confirmed their QE2 programme last week which to date has received stinging criticisms from many quarters not least because it is considered to be a policy of self interest and an indirect mechanism to debauch the US dollar. Today’s likely pullback in the Dow will also be helped by a modest rise in the US dollar, particularly against the euro. However, this re-tracement for the Dow will be short lived given the strong technical picture coupled with the underlying fundamentals, we should see the Dow continue its upwards path in due course and my own forecast still remains above 12,000 and beyond.
