Wednesday, February 16, 2005

The Big Picture

Let's take a look at the big picture for a moment. Below you will find the monthly charts for the DJIA and the Nasdaq 100. They are both painting a different picture and keeping me up at night. One (DJIA) is looking rather toppy and the other (NDX) is looking like it just broke out from a very bullish bottoming pattern. Your guess is as good as mine. Let's take a look:

Click to Enlarge Posted by Hello

As you can see from the monthly chart above, the DJIA is currently at its long-term downtrending line at around 10,890. Will it break out to new multi-year highs? The RSI and Stochastics are pionting to no, but there is no fighting the market. This will definitely be interesting.

Click to Enlarge Posted by Hello

Now for the conundrum, the Nasdaq 100 looks like it broke out of an inverse head and shoulders pattern on 11/03/2004. The price level has now come back down to re-test the neckline on the monthly view. If you look at the shorter time periods, you will see that the NDX has successfully bounced off of the neckline. The red dotted line is the minimum target if the NDX did indeed just break out of an extremely bullish bottoming pattern.

Any thoughts???

Best Regards,

The Soothsayer of Omaha


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