A Good Setup for an Upward Thrust Monday
Friday continued the consolidation from Wednesday – solidifying the tight range and upper trend line that is now right at 26,000. This pattern indicates a likely move to the top of the range at 27,600. A downside break through 26,000 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 27,600 range. Overall posture is clearly bullish, and I would expect stocks to push Dow up and down within this range for the next few weeks
The chart outlook clearly suggests a move to 27,600 over the next few days. In the absence of additional negative news, we will then likely break the wide range and move on to 29,500.
This is still a news-driven market. We want to continue to watch 25,000 for a potential break if the market pulls back to that level for any reason.
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 very low low rates. There is talk of a new mortgage bubble brewing. And Earnings are going to be dismal.
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 coming months.