The Dow closed at 11215 today, 10 points higher than its high close in April. In concert with yesterday's Dow Transport breakout close, we have a Dow Theory confirmation. This could result in additional buying on a technical basis.
The Dow has yet to take out its April intra-day high of 11258.
The S&P 500 broke above its recent October 25 intra-day high of 1196.14 at 1198.30 today, and closed at 1197.96, some 19 points shy of its April high close and 21 points shy of its April intra-day high.
Should the uptrend continue, resistance zones on the S&P are anticipated at 1203 (Fib), 1220 (old resistance), and 1240-1250 (Gann).
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I replied in an earlier thread on Dow Theory confirmation that under orthodox Dow Theory, surpassing Apr high on a closing basis does not generate a trend change signal and hence results in no new buy signal as its primary trend has never changed from Buy to Sell since Apr 09. Quoting the work from Tim Woods, a respected Dow Theorist, there has been no joint violations of secondary lows of DJIA and DJTA when the correction started in earnest in late Apr 2010. The May flash crash lows could NOT be considered as secondary lows under Dow Theory as they were not lows on an intermediate basis. Hence the original trend change signal generated in Apr 09 where the primary trend changed from sell to buy remained intact.
ReplyDeleteWe may see some more buying here but it certainly is not in accordance with Orthodox Dow Theory.
Anon, that is my understanding as well.
ReplyDeleteJust getting new highs is enough to promote short covering and new long positions, both. In addition, those that see it as Dow theory will buy regardless of whether their understanding is correct.
I think an attempt at 1220+ is likely here givent he futures action this AM. It may take a few days to play out.
Where it gets interesting is if the market keeps going up after about the 10th-12th of this month, although some kind of correction is going to be in order regardless. Assuming melt up does not continue unabated, the macro would not seem to support that. =)
Thanks for the clarification, Anon.
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