Thursday continued the consolidation from Wednesday – solidifying the tight range marked in the 39 Minute Chart from 25,800 to 26,200. This pattern is quite bullish, indicating a likely move to the top of the range at 27,500. A downside break of this range will mean weakness – and a likely move down to 25,000.
DJIA – 39 Minutes
Looking at the Daily Chart, we see a good case for a continued consolidation in the 25,000 to 27,500 range. There is certainly enough bullish news with a new stimulus package and coronavirus breakthrough. So the overall posture is clearly bullish.
For the moment, the bullish chart outlook clearly suggests a move to the top of the trading range over the next few days. In the absence of additional news, we will then likely break the wide range and move on to 29,500.
DJIA – Daily
This is still a news-driven market and has tremendous potential for highly volatile swings, even though today’s action was once again calm. We want to continue to watch 25,000 for a potential break if the market pulls back to that level for any reason.
Given the pattern that has formed over the past three days, an upside break is likely. The Fed’s continued stimulus in an election year has established strong upside pressure. This has been going on for the past decade, with “quantative easing” and low rates.
While the Fed can’t prop the market up forever, it can certainly fuel a continued rally going into November – unless negative news enters the market that even the Fed can’t fix. This is a potentially explosive situation and we can expect extreme volatility over the next 5 months.