The Dow broke past the 200 day moving average and closed above it on Friday 3 May 2008. Some people view this as a very bullish sign. Coupled with the fundamental news of the less than expected job losses in the US economy, some even say this is the beginning of a new bull run as the US economy recovers.
My time frame tends to be week to week these days so I'm not sure about that.
Obviously the bullish close is a positive point.
However there are several factors that point against this being a sustained breakout. Firstly the volume of trade done was relatively low. Secondly the RSI is deep in the overbought region. It is highly likely that the Dow is due for a throwback soon.
Support levels could be at 12765 and 12265. What I would be more interested in is to see what type of bad news cause this throwback. It is in my opinion that unless we see a new type of bad news hit the market, it is unlikely that the throwback will be too severe to even get close to the March lows.
Hence my strategy would be to let profits run at this point in time and buy on dips or oversold RSI levels.
On the SMA/EMA crossover trend change system, the uptrend is certainly still intact, however the 25 SMA is diverging quite a bit from the EMAs. Hence a throwback is on the cards soon, probably next week.
S&P 500
The S&P 500 mirrors the Dow except that it isn't the 200 MA that was broken but the downward trendline.RSI is similarly overbought. Supports will be at 1400 and 1340.
SMA/EMA crossover trend change system also shows upward trend crossover.
NASDAQ Composite
The NASDAQ mirrors the S&P 500. Support at 2420 and 2300
Uptrend but 10 SMA is diverging and a throwback is likely soon.
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