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Monday, June 22, 2009

DJIA >>> More bullish evidence

June 2009 : The Dow broke a key resistance last week, giving more fuel to the bullish scenario. But the index still hasn't bottomed. It could be a laggard. The ETF, VTI, representing the total US market, has bottomed albeit with unimpressive volume. The Consumer Discretionary sector has also bottomed nicely as have quite a few blue chips: Coke, Microsoft and Exxon. Thus the balance of probabilities is still in favour of the claim that the market has bottomed.
A breakout from a double bottom albeit with diminishing, rather than increasing, volume. For a reliable reversal, volume should be the opposite of what we see: a mirror image of the histogram starting at the surge of volume in October 2008

Resistance at 8,500 is broken. Next resistance at 9,000. The scenario in green is a best case scenario. One could imagine a few less desirable ones
A persuasive bottom for the Nasdaq, compared with the tiny bottom that sufficed to reverse a much larger bear trend. A good bottom with fairly good volume adds evidence to the claim that the market has bottomed.
PE data for the index is controversial. The S&P website only gives quarterly data. This chart is a mixture of data from Robert J. Schiller and Jeremy Siegel. No persuasive trend is shown. However the index does look fairly cheap.

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