It’s been a few days since my last post as I’ve been out of the office on a few projects and just not available prior to the open. Since then the overall market has put in a strong rally. The Dow Jones Industrial Average has risen from a closing low of 10,655.30 to close at 11,518.85 yesterday for a gain of 863.55 points or approximately 8.1%. As of yesterday’s close, the Dow Jones Industrial Average is now down only 1.39% on the year. While my 1st Rule a Trend may be that a trend remains in place until it is broken; my 2nd Rule of Trends is that the longer a trend remains in place the greater the chance it will be broken.
While the Dow has clearly broken above the triangle pattern shown in the chart posted in Monday’s blog, it should also be noted that it had also broken below support a few times as well. As always, the question remains what is the direction of the market?
Well, since the market sold off in early August, the post selloff closing high on the Dow Jones Industrial Average is 11,613.53 This is about 95 points below yesterday’s close. I always consider my role to be one that interprets what the market is telling me, not someone who tries to bend his forecast to fit some underlying wishes or desires. While it is very tempting to declare a new market rally to the highs set earlier this year; I am going to maintain my opinion that the market is in a sideways pattern until we see the Dow Jones Industrial Average close above 11,613.53 on meaningful closing basis.
The Bottom Line: I am still looking for the market to track sideways and have doubts about the strength of the recent rally.