Indexes - First Week Of June

Pivotal Week Ahead. Fundamental News - a Catalyst?

DOW Friday closing price - 16717

The DOW generated a new weekly closing high on Friday, above the previous one made last week at 16606, but once again failed to make a new intra-week high as the index fell short by 14 points of 16735, suggesting that the buying interest continues to be limited. Once again though, the index closed on the highs of the week and further upside is likely to be seen this week but this time with a high probability of making a new intra-week all-time above 16735.

The DOW ended up generating a weekly close at what is considered a "general" resistance area at 16700 (300 points below an even level such as 17000), meaning that there is a decent possibility that next Friday the index will close in the red and show some topping action from where the "sell in May and go away" adage can begin to develop. In the year 2000, the index got up to 11750 and generated a weekly close at 11721, possibly suggesting that the same "general" resistance level will stop the rally this time around.

The DOW will be getting important fundamental news this week in the way of the ISM Index on Monday and the Jobs Reports on Friday but the probabilities favor profit taking occurring after the reports unless they are overwhelmingly bullish (unlikely). In addition, the index has recently been supported by the NASDAQ rally as that index was in need of a retest of its 14-year high, but with that index now having reached the minimum high required for the retest, meaning that the DOW is now likely to move more on its own than as a shadow partner.

To the upside, the DOW only has minor intra-week resistance at 16735 that is likely to get broken early Monday morning. Above that level there is no prior resistance but as the index nears the strong psychological resistance at 17000, the selling is likely to increase. To the downside, the DOW has built decent support around the 16300 level, having been down to that general area 3 times over the past 4 weeks (16312, 16357, and 16340). In addition, the 50 and 100 day MA's are both in that general area as well, suggesting that for the traders it has become a pivot point that if broken would suggest the top is found. Further but minor support is found at 16240 and then the strong support at 16015/16046 that is considered a double low that if broken would likely bring in new selling.

On another note, if the DOW goes above last week's high at 16721 (likely) and then turns around and goes below last week's low at 16607, it would be considered a negative statement, especially because of the level of general resistance as well the fact the economic reports of importance will have come out.

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The opinions and commentaries by Mr. De Vito are not a recommendation to buy or sell, but rather a charting guideline, based on his own knowledge and experience, regarding the stocks he is following ...

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