First, let’s look at the DJIA weekly price chart. An observation from the weekly price chart is during the last three years the prices have been trending along the rising trendline. Even with the recent pullback, the price has held above the trendline. In addition, a bullish tweezer candle pattern has formed from the last two weeks price actions.
(click on the chart to enlarge)
From the daily price chart, one can see the 20 EMA, 50 SMA and 200 SMA are rising, and the DJIA closed above these moving averages. Furthermore, the recent lower high, lower low price pattern has been invalidated by the last session’s intraday high. The DJIA is less than 169 points or approximately 1% from its all time closing high of 16,576.66.
What will propel the DJIA to a new all time closing high? Here are a few of the stocks in the DJIA that are poise to make new 52 week high:
MMM
UTX
DD
MRK
KO
MSFT
INTC
Finally, the SP500 also demonstrated similar behavior as the DJIA. This should not be a surprise as I have mentioned in the March 23, 2014 blog post “Shifting” that the market is shifting to high quality/value stocks, and most of these stocks are found in the SP500 and in the DJIA.
Here is the weekly chart of the SP500, note the similar rising trendline support characteristic.
Another 8 points then the daily lower high, lower low pattern in the SP500 will also be invalidated.
Am I crazy for saying that the DJIA is getting ready to make another attempt to close with a new all time high? Maybe I might have misread the market and the charts, but definitely not crazy. In regardless, one needs to continue to be defensive and be selective.
Disclosure: Long KO.
