The Dow Jones had a fairly strong day during the session on Thursday, after the ECB announced that it was willing to buy “unlimited” quantities of bonds in order to support the situation going on in the European Union. This set off a nice “risk on” rally in various markets around the world, and the Dow was no different.
However, it should be noted that the 13,350 level is still holding as resistance. We did not manage to break above it, and as such it appears that there is still a little bit of trepidation going higher. While this certainly doesn’t have us looking to short this market, it does show that the participants are more than likely going to be waiting until after the employment numbers come out later today from the United States.
It really will come down to whether or not traders are looking for more stimulus, or job growth. However, we do look at this chart and realize that it seems to be pretty bullish at this point in time and we think that the resistance level will eventually give way.
On a break of that resistance area we are more than willing to go long. We would use a daily close in order to do this though, as nonfarm payroll Fridays tend to be very volatile. Because of this, we think that the market will be a buy if there’s a pullback. Obviously, there does come a “point of no return” as far as a selloff is concerned, but we think that doesn’t appear until we see the 13,000 level gets violated.
As the markets move forward, it will make sense to buy dips in this market going forward, especially as we prove support going higher. We still favor buying the Dow Jones futures over individual stocks in general, simply because it allows us to play the market for directional bias. There are far too many issues out there that affect different companies in different ways right now to even begin to think that picking stocks on an individual basis will be an easy chore.