The daily chart for the Dow Jones in the form of the YM Emini futures contract for December is another like gold in that it is in a phase of longer-term congestion as it struggles to break free from the stranglehold which is the VPOC (volume point of control). Last week was a net positive one for the index, with buyers stepping in on Wednesday (hammer candle on good volume), and signaling a potential reversal following the initial two down days of Monday and Tuesday. This was duly delivered on Thursday and Friday where both sessions closed on widespread up candles. However, note the volume which certainly looks a little lightweight, particularly on Thursday’s candle which was the stronger of the two and so it has been no surprise to see the market pause in early trading at the start of a new week.
As with the gold chart here too, we have some key technical levels to consider, not least the 35,350 region where we have seen repeated failures, most notably in August and as a result developed the blue dashed line of the accumulation and distribution indicator which paints the strength of these areas visually. If the YM Emini does ultimately take out this level, we could see a further leg higher in the longer-term trend. However, the weight of fundamental issues is now starting to take effect and as I have highlighted before, resulting in charts that are technically fragile and more likely to fracture. So for bullish stock traders and investors, extreme caution is required.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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