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Dow Rally: Recent volatility points at further downward pressure

Posted November 28, 2007

“The Dow has just popped its nose above the critical resistance level at the 200-day moving average. Considering the tremendous amount of recent market volatility, major market averages will probably encounter downside pressure at this level.” — Bryan Bottarelli 

by Bryan Bottarelli

Baltimore and Chicago — (TFN): As of 1:00 p.m. CT, the Dow had just ticked up 300 points on the day. What a move! But before jumping on the bullish bandwagon, allow me to highlight some important technical considerations.First and foremost, consider this: The Dow has just popped its nose above the critical resistance level at the 200-day moving average.

I don’t know about you, but considering the tremendous amount of market volatility we’ve seen lately, I would have to think that the major market averages encounter downside pressure at this level:

Dow Rally candlestick chart

Another consideration: Most of this rally, which began yesterday, was sparked by the financial sector after Citigroup (C: NYSE) received a $7.5 billion capital injection from Abu Dhabi Investment Authority. According to preliminary reports, the world’s largest sovereign wealth fund is purchasing a 4.9% stake of Citigroup, the largest U.S. bank, which bolstered confidence in the financial sector and sparked today’s rally.Adam and I both believe that this euphoria is a temporary event.

Read on to find out why…

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Posted by Bryan Bottarelli · Filed Under US Stocks and Markets 

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