Technical Analysis Of The Dow

I just wanted to post a few technical comments about the Dow Jones Industrial Average.

In the above chart of the dow, notice the double top formation that has taken place at the 200 day moving average. I consider that very significant and am now turning cautious on the dow.

The fact that the dow closed below its trend line is also of significance and in my opinion suggests that stocks may move sideways to lower. I'm not turning bearish on stocks, but if I was long the dow, I'd either tighten up my protective trailing stops or take some money off the table and wait for things to turn a little bit more bullish.

Keep An Eye On This Group Of Stocks

Just a reminder to keep an eye on the mortgage financial stocks. These stocks have been very quiet over the past few weeks which means many traders are not paying too much attention to them but my advice is to watch these stocks closely.

In the above chart you'll notice the very low ADX reading which was below 10 earlier this month. My interpretation of this indicator is that a large trending move is about to materialize and an expansion in volatility will take place.

Notice also how the MFX index has developed a large descending triangle. In my opinion I feel we will see a down move take place in the very near future.

As always, nothing works 100% of the time but I just wanted to share with all of you what I am watching BEFORE the moves happens.

The U.S.Dollar Falls

On May 10th I posted some bearish comments on the U.S. Dollar based on the trend and the position of the 40 day stochastic oscillator. As you can see in the above chart, the stochastics crossed a few days ago and the dollar is now selling off. I think we'll see further weakness in the greenback in the coming weeks.

Platinum Makes A 10 Week High

As you know I've been bullish on Platinum based on its relative strength versus Gold and also because it's in a long term uptrend. Earlier this month I posted a chart of
Platinum vs Gold and you can see that chart by clicking here.

Platinum appears to making a move up and has made a 10 week high. Platinum is clearly the strongest metal and my upside target for this market is the highs from March.

Transportation Index Hits Price Objective

Today the transportation index hit my upside objective that I've been patiently waiting for since I first wrote about this index back on April 1st.

I exited my long positions this morning into today's up move when the index hit the 5500 area.

Below is a 5 minute chart of the Transportation index which shows the violent reversal this index had in the afternoon.

Mortgage Finance Index Is Vulnerable

Since March 17th, the S&P500 has rallied nicely but the mortgage Finance Index (MFX) has gone sideways. In my opinion this is a sign of weakness and alerts me to the possibility of these stocks selling off. You'll also notice the symmetrical triangle formation that has developed over the past 2 months. A move below 42.50 would be very bearish for the mortgage financial stocks.

New High In The Australian Dollar

The Australian Dollar had a big up day today breaking out to a new all time high. In the above chart you'll notice the ascending triangle that has developed over the past 2 1/2 months. This pattern suggests that the Aussie Dollar can go much higher from these levels.