Dow Jones Industrial Average – We have had a nice move up over the past two weeks bouncing off support and now we find ourselves in a virtual no mans land between the 50 and 200 day moving averages. Technicals are positive but inconclusive as we wander in this trading range between 10400 and 9800.
Traders and fund managers return this week and there are some items which should dominate headlines namely concerns out of Europe, 3rd Quarter corporate profits, important economic reports namely CPI, PPI, Capacity Utilization, Industrial Production, and the upcoming mid-term elections.
Caution is warranted here unless we can break above the 200 day moving average and clear the 10500 level. It is possible that we start the week with a rally but have it lose strength as the week goes on.
Longer-term we need to move above the 50 week moving average in order to move back to the 200 week moving average.
I would be hesitant to put any new capital to work on the long side until we have a confirmed breakout above resistance and the trend establishes itself.
Dow Jones Utility Average (UTIL) – The Utilities were added because there is something interesting on the daily chart relative to the Industrials. Check the RSI and MACD as they appear to be in the process of rolling over while Friday's down volume was much heavier than normal.
This bears watching as the week goes on as the Utilities may be leading the market and flashing a sign.
Canada (TSX) – The TSX is in a long basing pattern. Economic reports over the past week gave investors some pause with the possibility of 3rd Quarter growth coming in weaker than expected due to a slowdown in the US. Technical indicators look overbought and investors would be well served to hold off on any buying in the event the TSX pulls back in the coming weeks.
A move above 12250 would signal a breakout and move higher.
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