Executive Summary: I like the recent Dow Jones Industrial Average (DJIA) action – moving sideways, consolidating. Even though the DJIA is “overbought” and extended, that does not mean that it has to make a downward correction, it could easily continue the sideways consolidating action – which is what we believe is the most likely (but not guaranteed) scenario. Stay the course invested in US Large Cap stocks.
Friday, December 23, 2016
We all want to know where the Dow Jones Industrial Average is going.
I am hearing predictions of Dow 6,000 to Dow 30,000 – so where is it going?
The truth -- no one really knows, no one.
Let’s look at the year-to-date daily chart for the DJIA:
You can see by the blue circles both the RSI and stochastic (oscillators) are indicating an overbought DJIA, an extended DJIA,
That overbought condition looks similar to the period from mid-February to April of this year.
I have marked both sideways actions (earlier this year) and currently with an orange line showing the sideways market action
So, ideally, we will continue to move sideways as we have been doing recently – we call that consolidating –it’s a rest period, a time for the DJIA to take a breather from the uptrend. Backing and filling action.
Continuing the action from earlier this year, we would think it is possible for the DJIA to continue to move sideways, consolidating, and then breaking out higher, breaking out and through the 20000 level.
The Up trend continues in tact – so stay invested.
The Trend is Your Friend.