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US equity market: sign of vibrant bull market ahead

, November 18, 2013, 0 Comments

A global financial crisis that led to a deep recession in 2008 which brought the U.S economy to its knees resulting in flow of massive liquidity across the emerging economy.  Current state of US economy would have been weak if Federal Reserve would not have held interest rates artificially low and bought bonds at relentless pace. US recently saw a partial shutdown & also a near miss debt default plus a Chinese rating agencies downgrade. But these things seems to be of past as Dow Jones clocks new high on every possible trading day.

In my opinion despite all of its old flaws US equity markets still remains the biggest, the deepest & the most transparent market in the world. The short-term interest rates in US did remain low or one can say kept artificially ultra low to make the equity prices an attractive asset class. So as per the most fundamental financial models, equity market as an asset class got a big boost by returns conscious smart investor & their thumbs up led to the current bull market seen in the US equity market.

DOW JONES Weekly Chart - MarketExpressA bird’s eye-view observation in the weekly Dow Jones chart hint that secular bull market began since February 2012, when it crossed the weekly falling horizontal trend line at 12705 on 10th February 2012. Dow Jones gave 2 weekly bullish confirmations by taking support  in July 2012 & early November 2012 on old highs & then sprinted to beat an old top of 14300 ( 20/10/2007) on 8th March 2013 by giving a weekly closing at 14379 & heralding vibrant bull rally.

Chart Structure: Dow J0nes made 3 subsequent resistance area 1st at 15555-May 2013, 2nd time at 15664-August 2013, and then again3rd time at 15710- September 2013. Since low of 10562 in last quarter of year 2011, Dow Jones has been making higher highs & higher lows structurally in daily chart, which is a basic & inherent bullish trend structure prevailing in Dow Jones.  4th time stiff resistance of 15700 got bought into as Dow Jones clocked a new high in November 2013 at 15962. Dow Jones upward journey has kept intact the bullish structure of higher high and high lows.

Price Pattern: The horizontal trend channel comprises of 3 resistance area around 15500-15700 range and 3 supports area around 14500-14750 range. The horizontal trend channel with its 3 supports & 3 resistance points act as a bullish continuation pattern and this horizontal trend channel will eventually act as crucial support on any reversal or pull back in the current Dow Jones rally.

Moving Average
: 200dma is following broader trend decisively within daily time frame of Dow Jones chart and is also acting as strong support to the daily trend in Dow Jones. If on pull back in Dow Jones price a strong support will be garnered at 200dma.

Technical Momentum Indicator:
The slow stochastic level is currently above 100 at a mega overbought zone. A pull back or technical weakness in Dow Jones prices may take slow stochastic indicator below 100 levels, and on a positive cross  near or at 70 can give an excellent buying opportunity to a long trader.DOW JONES Weekly Chart - MarketExpress

Technical Conclusion:  A clear Bullish trend has emerged in Dow Jones and show a sign of vibrant bull market ahead in US equity market. Especially crossing resistance of 15700 successfully may take it further to north at 16000 & beyond.

Invest Or Not To Invest: An active trader may invest/trade in Dow Jones future listed on NSE F&O or US equity funds on pull back rally with an adequate stop loss and trailing stop loss. An Indian investor can make a period purchases/investments by taking advantages of any pull back in Dow Jones in Indian listed US based equity mutual funds from ICICI & Franklin Templeton mutual fund.
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