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TCI Trading Signals: Dow Jones Industrial

Dow Jones Industrial and the Duration of the Bull Party 

Dow Jones Industrial (Dow 30) is one of the best stock-market indices in the world to test a technical analysis system. It is such an old index that can provide a unique insight of historical data. Dow Jones has entered recently a price area of historical highs. Using fundamental and technical analysis we are going to see what happens next. But let's start with the signal first.

MARKET INSTRUMENT TARGET  DURATION STOP LOSS

Dow Jones Industrial Average (DJIA):

14,512.03 

(3/22/2013)

14,850.00

Working Days:

+9 / +11

(April, 5 2013)

(April, 9 2013)

Stop-Loss Price:

14,260.00

From a Macroeconomic Point of View

The US economy is in a much better condition than 2 years ago. Growth is stable, unemployment is falling and the credibility of the US financial system is improving. What could ruin this nice macroeconomic picture could derive mainly from 2 facts:

Factor-1) The European Crisis

The European crisis is certainly a very important issue for the world economy. In 2013, Europe is officially in recession while the political conditions in the South of Europe are making the macroeconomic environment unpredictable. For the time, the last episode of the European Crisis (Cyprus Crisis) seems to come to an end and during the next couple of weeks, things in Europe can get back to normal.

Factor-2) A Stronger Dollar

As unemployment is falling and the US economy is growing the concerns of FED are moving more to inflation. The US interest rates have only one way to go and that is up. Higher US interest rates given the bad condition of the European Economy could strengthen the Dollar against the Euro to 1.20, but even to 1.0 in the next couple of years. That could jeopardize the macroeconomic prosperity of the US economy. But for the time, Euro is already in oversold levels against the US Dollar and it is expected to remain in the area above 1.2900 for some time ahead. So as concerns the next couple of weeks a stronger US Dollar is not a danger for the US economy and the Dow Jones Industrial that we are interested in.

When Fundamentals are Stable, Market Psychology is the King

In overall, the fundamental environment of the US economy is not bad and so what happens to Dow 30 in the next couple of weeks seems to be defined clearly by the psychology of investors. The perfect tool to measure the stock-market’s psychology is technical analysis and that is exactly we are going to use below.

Dow Chart since 1935 and Technical Analysis using TCI System

Chart: Dow Industrial Line Chart 1935-2013 and TCI Technical Analysis

Dow Jones Industrial Trading Signal

In the upper part of the above chart we can see a Dow 30 Line chart from January 1935 to March 2013. Dow Jones has closed at 14,512.03 in the 22nd of March 2013. It is an historic high for Dow Jones. Dow Jones seems to have the potential to move considerably higher, to 15,000 or even to 16,000 points. But be careful, this move must not happen rapidly.

In the lower part of the above chart, there is a TCI Long chart during exactly the same period (1935-2013). TCI is aTrading Center tool to measure the average real Return% of a Market over time. TCI Long for Dow 30 seems to be moving historically in a broader price area from -80% to +80%. Most of the great historical bull markets have ended when TCI Long= +40% / +50%. Today TCI Long for Dow Jones is about +25%. We could say that according to TCI long, Dow isn’t in overbought price levels yet.

Using Simple TCI to Forecast the Dow Bull Market Timeframe

As we have already mentioned what makes TCI analysis system unique is that it can forecast the timeframe of future price fluctuations. So by turning TCI to a shorter time frame we got +9 to +11 days until the short-term bull rally ends. If we add 9 and 11 trading days to March, 22nd 2013 we get April the 5th 2013 or April the 9th 2013. Here are some Dow Jones and TCI Data:

Date

High

Low

Close

Volume

Change (%)

TCI (%)

7-Mar-13

14,354.69

14,296.24

14,329.49

1,170,800

0.23

6.07

8-Mar-13

14,413.17

14,329.49

14,397.07

1,156,300

0.47

6.42

11-Mar-13

14,448.06

14,373.32

14,447.29

948,800

0.35

6.25

12-Mar-13

14,478.80

14,412.06

14,450.06

1,021,000

0.02

6.46

13-Mar-13

14,472.80

14,411.66

14,455.28

839,200

0.04

5.85

14-Mar-13

14,539.29

14,455.28

14,539.14

1,173,900

0.58

7.19

15-Mar-13

14,539.14

14,470.50

14,514.11

4,077,700

-0.17

7.73

18-Mar-13

14,521.59

14,404.21

14,452.06

1,196,400

-0.43

5.65

19-Mar-13

14,514.34

14,382.09

14,455.82

1,221,700

0.03

7.07

20-Mar-13

14,546.82

14,455.82

14,511.73

1,212,400

0.39

6.59

21-Mar-13

14,511.73

14,383.02

14,421.49

1,104,500

-0.62

5.49

22-Mar-13

14,519.95

14,421.49

14,512.03

1,014,500

0.63

6.53

Forecast +1d

 

 

 

 

 

6.11

Forecast +2d

 

 

 

 

 

6.24

Forecast +3d

 

 

 

 

 

5.79

Forecast +4d

 

 

 

 

 

6.08

Forecast +5d

 

 

 

 

 

6.03

Forecast +6d

 

 

 

 

 

5.77

Forecast +7d

 

 

 

 

 

5.21

Forecast +8d

 

 

 

 

 

6.42

Forecast +9d (target)

 

 

 

 

 

6.76

Forecast +10d

 

 

 

 

 

5.47

Forecast +11d (max)

 

 

 

 

 

8.09

 Correction Begins

 

 

 

 

 

6.90

 +13d

 

 

 

 

 

5.05

 +14d

 

 

 

 

 

5.52

 +15d

 

 

 

 

 

4.79

□ Giorgos Protonotarios

for Trading Center (2013)

Forecasting Dow Jones Industrial using TCI

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