My favorite time to go through charts is on the weekend. The markets are closed and I’m in a relaxed mood, which allows me to not be influenced by constantly moving price action. Looking at the U.S. Indexes, I feel that the Dow Jones Industrial average is going to be the leader in the next move higher.
Heres what I see:
-Price ripping higher after going nowhere/consolidating for over a year
-Price ripping through the 161.8% Fibonnaci extension of the 2008-9 decline
-Monthly RSI back into overbought levels (bullish, not bearish)
-Trend is your friend. An object in motion is more likely to continue than reverse
The Dow Industrial is also the only index to reach overbought territory on the monthly chart since this rally started.
A year and a half long Head & Shoulder bottom pattern broke out, retested and is now above a 200 week moving average along with overbought momentum following a nice bullish divergence. Tough to argue against this chart!
The best part of the Dow potentially continuing to lead is that the index is made up of 30 stocks. At anytime one can easily run through them indiviudally to gather a better picture of where its at and where it may be heading. Holding two of the strongest large cap financial names – JPM and GS – helps as well.
These handful of factors suggest higher prices and have me looking to overweight the Dow in my portfolio going forward.