Last week I explained here on Traderplanet.com a method I’ve been using recently that has helped me with my personal trading. This system consists of applying various exponential moving averages at the same time giving me a possible direction of the market.
Now that we’re in the midst of the summer months, it’s time we study the possible next moves of the Dow Jones Industrial Average with this system.
DOW MINI FUTURES LOOKING TOPPISH
On the daily chart of the mini futures contract and by applying all 13 exponential moving averages, we can see a clear picture of what might happen this upcoming month of August.
Each time the price moves approximately 3% away from the 55 EMA (red line), we’ve experienced a minor pullback. This has happened already three times this year and is currently in the right configuration to happen again.
The faster EMAs (yellow lines) are already stalling and are looking to cross below the slower ones (green lines).
LOOKING FOR CONFIRMATION
What’s the Vantage Point chart telling us here?
- The chart below shows a negative crossover between the predicted 2-Day EMA and the 5 day simple moving average, along with a large divergence on the Predicted Long Term difference
- The Williams PSI is showing that professionals are already getting out of their positions before their summer holidays. The last time this happened (end of May) the price dropped a week later.
- A beginning of a distribution pattern from big hands to small hands on the Williams EMAI.
SUMMER ETF PLAY
Can the Dow Jones Industrial Average hit 16,000 this summer? My view is not yet. Although this index seems to be hitting all time new highs continuously, we should trade carefully as the big hands are about to take a summer break and we small guys will not be able to continue pushing the price up.
If you’re looking to profit from a possible retracement in the Dow, an ETF that could come in handy is ProShares UltraPro Short Dow30 ($SDOW), which is a reverse three times leveraged Exchange Traded Fund.
