Thursday, October 3, 2013

DJIA futures continuation chart

There is a potential double top pattern forming on the weekly DJIA futures continuation chart shown below.  We need a weekly close below 14740 for this pattern to be confirmed.  The pattern objective would be around 13858 with a potential stop around 15375. 

First, some supporting background on the monthly chart.  The most recent high of 15658 was right in the middle of a fib cluster based on 3 ABCD patterns.  The dominant pattern dates back to a late 2010 activation.  So we are seeing the current high being formed in an area of potential significant resistance.  There is also some bearish divergence seen on the monthly RSI.

Second, some supporting background on the weekly chart.  We've seen the market recently make its third new high since May, but barely moving much higher than the previous highs.  As a result, we also see bearish divergence on the weekly RSI.  This shows a slowing of upside momentum.  Finally, the most recent high of 15658 was made on a weekly shooting star pattern.  We have since seen selling pressure the past week and a half. 

Let's see if this double top pattern gets confirmation in the next week or two.  If so, then the objective of 13858 should be reached.

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