Update on DJIA: Jul 29, 2019

In our last dedicated post six months ago, we discussed the critical resistance DJIA faced: the neckline of a large H&S Pattern.

…it’s important to note that like SPX and COMP, [DJIA] is backtesting a point of potentially strong resistance — the neckline of a large Head & Shoulder Pattern that never completely paid off.

DJIA’s reversal had occurred 500 points short of the indicated target and was thus susceptible to another leg down following the backtest that, ideally, would align with a significant channel line or Fib level.

But, the White House had other ideas. Mnuchin planted a story with the Journal that the China tariffs might be lifted.  Combined with the ongoing beatdown on VIX, DJIA sliced through the neckline like it wasn’t even there.  Of course, it was careful to observe the neckline in the midst of a backtest once it was recast as support (which involved a second busted H&S.)

Since then, DJIA has ignored a potential triple top and pushed to new highs which just so happen to mark two significant points of overhead resistance.  I know, I know…fool me once and all that.But, this time might just be different.  We’ve been following an analog for the past two weeks which has been quite accurate so far.  If it plays out, DJIA might have already peaked and could be facing a significant decline.

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