DJIA: If it’s Not A Rebound, It Could Just Be Getting Its ‘Head’ Together

The rebound this week appears somewhat lacklustre for the Dow Jones Industrial Average (DJIA). So if momentum struggles to pick up, we’re watching a potential bearish reversal to materialise on the daily chart.

Currently -2.6% lower, ‘sell in May’ appears to be playing out. Admittedly its seasonal tendency this month of the year is not too convincing, but we can see that average positive returns diminish noticeable following a peak in April. Furthermore, June tends to be a weak month for DJI according to the 30, 15 and 10-year averages, which could leave time for the index to carve out another lower high.

April’s failure to break to new highs sends a warning to Dow theorists. Back in April, both the Nasdaq and S&P500 broke to record highs, yet the neither the DJIA or DJT (transportation) confirmed the breakout. This means a lower high has occurred whilst S&P and Nasdaq broke to new highs which, in turn leaves the potential for a head and shoulders reversal beneath record highs.

If successful, the head and shoulders top suggests an approximate target around 23,750 (just above the 61.8% retracement level). Of course, we still need the right shoulder to form and for bearish momentum to break its neckline. But with the warning signs there, it allows us to at least prepare for this potential reversal.

 

City Index: Spread Betting, CFD and Forex Trading on 12,000+ global markets including Indices, Shares, Forex and Bitcoin. Click here to find out more.

 

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.

WHAT IS ADVFN?

ADVFN covers all things stock market.

From the news and opinion pieces on pages like this to share discussion forums, charting tools, financials, live share prices and Level 2, order book data

If you trade or invest ADVFN has the tools you need to make the right decisions.

• 

  101 Ways to Pick Stock Market Winners

  You need the number one bestselling investment guide, the definitive text for day traders, investors and stock pickers.

• 

  The Death of Wealth

  Dissecting the global economy and the financial markets, the book lays out the evidence for the next economic game changer: the Death of Wealth.

• 

  Windsor Brokers

• 

  Kiana Danial

• 

  Susan Marmor

• 

  Kenneth G. Mondero