monthly chart analysis

Here's an interesting exercise, inspired by Richard Russell, of Dow Theory fame.

While I've said before that I'm not really taken by Dow Theory, nevertheless Russell is an expert chartist, with more experience doing it than almost anyone alive.

He suggests looking at the DJIA monthly and points out some interesting things. Here's my take:-



Notice how RSI trended down before the peak (back in May, in fact) and how it has never regained that level.

Further, look at how MACD is now turning over and the short-term indicator is looking to cross-over on the downside.

I've then drawn two trendlines. The first is a simple downtrend line.

The second is the RSI high point of the current bull market phase.

Finally, notice how the cross-over right about now and at approximately this price.

A monthly indicator will never help you with day to day trading, but it's certainly the most useful, in terms of primary market trends.

It looks to me like we are at a pretty critical moment, in price and time.