The bullish play continued in our favor as the Dow Jones made another weekly high last week.
For several weeks the 12650 level had provided a support base for the index to rely on and this has been good news for traders who have been looking for higher prices. Each upside resistance level has been successfully broken although it did take 11 days to get above the 12614 -12707 level.
The question now becomes is the new break valid or a false breakout?
We need to ensure that the 12707 level becomes a support area and if this is the case then we can target 13218 – 13321 as the next price objective. Although the larger degree pattern suggests that we are only retracing the recent decline, we now have a conflict between the longer term trend and the short term timeframe.
Short term the market is clearly up but the monthly trend is still down and therefore we should still be aware of any sudden surprises which could be in the closet. Hence I would be watching 12790 as a level which if breached would turn the short term trend to down.
Also May tends to see the markets get ready for a lackluster summer period and if we reach the resistance levels then this may suggest further sideways action for the weeks ahead.
Technical indicators remain bullish and therefore until further evidence presents itself the bulls remain in control for now.