Since the beginning of the month of May, the Dow Jones has been trading in a major down trend. However during past few trading sessions the Dow Jones has started to show support around the critical 10000 support level. In fact for the for the past 7-8 trading sessions, the Dow Jones has been trending sideways between 9900 and 10250. Despite showing some support around 10000, I still advise to WAIT on the sidelines as the market is still relatively volatile despite seeing a little more stability lately. Keep in mind that although the Dow Jones has jumped up over 200 points today that the Dow Jones has yet to have 2 consecutive positive trading sessions since the beginning of this major down trend at the start of May. I currently have only one long position which was taken after seeing the Dow Jones hold up above 10000. The next signs I will be looking for to confirm a reversal and a potential new major up trend, would be first to see the Dow Jones close up for 2 consecutive days and then to see it jump above 10250 and 10400, above its 20 day MA. The moment the Dow Jones manages to do these 2 things, I will consider this to be a confirmation of the reversal of the trend and potentially the beginning of a new major up trend. The MACD is starting to move up and getting close to breaking above the signal line, which is somewhat promising to see the Dow Jones' trend reverse back up. Based on the current conditions, I do believe we will have a relief rally sooner rather than later, however I doubt we will be hitting new highs for the year. The most likely and optimistic scenario would be to see the Dow Jones move back towards the peak of 11200 to only see it reverse back down. The current major monthly trend is down, while the major yearly trend is sideways and this will remain true until the Dow Jones either breaks down sharply below 9900-10000 or break up above 11200.
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