Weak follow up on Dow

There was a strong rebound last week when the Dow Jones Industrial Average (DJI) climbed from the low of 10,827.71 points to close at 11496.57 registering an increase of about 668 points or 6% on the previous Friday (18 July). The rebound was caused by the declining crude oil price.

This week, the DJI made an effort to climb higher by moving up to 11,698.17 and tested the 30 day moving average on Wednesday. Amazingly this is also the 38.2% Fibonacci Retracement level from the downward rally since May 2008. These resistances caussed the DJI to pull back aggressively on Thursday and on Friday (25 July), the DJI closed at 11370.69 points, about 120 points lower than the previous Friday.

The DJI falied to stay above the declining 30 day moving average, which I used to determine the short term trend. This shows that resistance exist even in the short term. The long term trend range (using 60 and 90 day moving average) is between 12,100 points and 12,250 points.


Daily DJI chart as at 25 July 2008 using NextVIEW Advisor

To really have a good rally, it has to beat the 11,700 points resistance level. Failure to do so would suggest the DJI to continue its down trend. Current support level is 10,800 points.

Commentary and Analysis by Benny Lee