Dow Jones
Dow Jones closed to a new all-time high last Friday despite a weak NFP report. The November data showed that 245k new jobs were created in America, half of what the market expected. Also, the number of permanently unemployed people accelerated, further revealing the weakness of the largest economy’s labor market.
Yet, the Dow Jones rally continued. The idea is that investors use any weakness in the economic data as supporting more stimulus down the road. As such, the only place to put capital at work remains the stock market, as the yields remain depressed due to easy monetary policy conditions.
This week another central bank, the ECB, will announce more easing. Therefore, the stock market rally may continue towards the end of the year, especially if we think that the Fed will ease even more in the week to follow.
Despite the bullish price action, Dow Jones forms a bearish pattern – a rising wedge. As such, bears may just be around the corner and willing to enter the market on a break lower. To do so, the index must show some weakness first. Therefore, bears may want to sell on a move below 29.800 with a stop loss at Friday’s highs and a take profit a half the wedge’s distance.
