Technicals - Dow Jones - the warning lights are flashing

Angela Mangan

The Dow Jones is located at key resistance of the trend channel that originated in 2008. It is located at the most overbought level on a momentum / RSI basis since 2007, and is approaching those same overbought levels, which is reason for extreme caution relating to the sustainability of the current rally. It needs to be emphasised that the RSI is not a timing or turning point indicator - it flags overbought situations, but does not provide an indication of when this overbought situatiion is likely to correct. A technical top formation is the requirement to indicate that the corrective phase has commenced and to generate a technical sell signal - and there is still no sign of this emerging.


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