Dow Breaks Out!

The Dow staged a 7.33% breakout last week in what looks like a possible continuation of the previous intermediate bull trend.

It is a possibility and not a certainty because the Dow has not retested the 200 days moving average yet to establish it as a support level. Yes, thats how much confirmation you need to call a trend, not just at the very first sight. In fact, this week could see the Dow failing at its short term resistance of 8750, which is where it is now, marked by the high made last month, and retest the 200 days moving average. In fact, if it does that, it would change the intermediate bull trend to an intermediate neutral trend.

Investors would be looking forward to how tomorrow's leading indicator turns out for more confirmation of economic recovery (see Stock Market Calendar). Consensus is for a lower number of 0.5% versus the last number of 1.2%. I pretty much doubt the Dow would stage a breakout of the 8750 level even if the number beats expectations. Media will then quote doubts about the pace of the economic recovery and things like that. In reality, investors always take some profit off the table after significant rallies, don't you?