Dow Jones Industrial Average September 18, 2012, Technical Analysis

The Dow Jones had a fairly quiet session on Monday, but didn’t lose value after forming a shooting star on Friday. This suggests that we could see a bit of a pullback, but we think the 13,300 level will offer quite a bit of support. In fact, that area of support should extend all the way down to 13,000.

We are still bullish of the stock markets in general, especially now that we have so much quantitative easing going on around the world, it is difficult to imagine asset prices going down for any great length of time. We are buying on pullbacks, and would not even think about selling anything Dow Jones related until we got below the 13,000 handle.

We will be taking positions in the Dow Jones feel the ETFs markets, and possibly the Dow Jones mini futures as they are one of the most liquid contracts that you can play. If you choose the play stocks directly, we suggest using dividend paying ones as one of the biggest drivers of this type of move will be the lack of yield in the bond markets. In other words, there will simply be a search for yield in general and household names that pay a steady dividend is certainly attractive at this point time. After all, few people would be concerned whether or not J.P. Morgan or Caterpillar are going to be around in five years.

Another thing that should be mentioned about this chart is the fact that we have been in of trending channel of sorts. We are currently at the top of that channel, and a pullback makes sense. In fact, the bottom of that channel lines of just about that the 13,300 level, so we think all of this fits together quite neatly. With this in mind, we will be buying the pullbacks in a general fashion from a directional related play such as the ETFs or the futures. As for specific stocks, it is not our favor way to play this market but we do admit the attractiveness of a nice dividend.