Dow Jones Industrial Average (INDEXDJX:.DJI) (Closed at 16659.25, Down 1.97%) is the stock market index of 30 large public companies based in the United States which fluctuates accordingly the price movement of these companies. The index opened negative which was its daily high of 16989.37 and traded with negative momentum the whole day and closed the day near its lows. The lows of 16649.05 which were made during the day are very close to the rising trend line supports near 16630.
In the context of Technical analysis, the index has formed a rising wedge pattern on weekly charts which started from the week ended 11th October 2013. The trend line formed by joining the lows of week ended 11th October 2013 and 13th August 2014 gives the support 16630 to the index. During the formation of rising wedge the volumes were declining and now when the 5 waves of the pattern has formed and the corrective wave have started it has gained the volumes which suggests strength in bears. Moreover it also meets the criteria of Elliot wave rules where 3rd wave will never be the shortest. Wave 1 is the longest and Wave 5 the shortest. Wave 4 entered the territory of Wave 1 which also adds to the characteristics of the wedge (ending diagonal). These kinds of patterns generally are seen near the end of bull market. The volumes as well as the volatility is rising signifying the people’s rising interest in the markets where smart money is disposing off its buying positions to the unknown investors. There were elongated negative divergences during these periods and indicators like RSI which reads at 40.78 on daily charts also don’t suggest the bull trend to continue.
Now, the only thing which will confirm the bulls are taking a sleep for the coming months or so will be the break below 16630 and this will add to, if it closes on weekly basis.
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