DJIA acted like the little engine that could…or was it the little engine that couldn’t?

From what we have seen, the index backed off from its recent high of around 8700 and has been correcting since then.

The one thing noticeable was that it is the 200-day moving average that is preventing the DJIA to continue moving higher.  It has been able to make highs above the moving average but not break away from it.  What could possibly happen now is that the index will range trade between the 50 & 200MA as the two are closing in on each other.

We should expect some more correction as the MACD has already indicated to us a bearish divergence earlier.

What we would want to happen is for the DJIA to correct some more to the levels of 7500-8000 before it would go back to current levels to complete an inverted head & shoulders formation.  Should this become a reality, we could expect the index to return to 11,500 or thereabouts.

However, we should learn to lighten up on our holdings for the moment.

Recommendation: Take profits
Resistance: 8567