I first mentioned the possibility that the Dow Jones index was forming a “Broadening Formation” on July 15th and that pattern now appears to be the dominant structure with a price target that has almost completed. Please take a look at the original post and then let’s see the updated structure as of today’s powerful move up. If we connect the doji highs in June (which are ascending) and begin a trendine from the May highs, we see the following upper trendline which has a price projection target around 9,200 to 9,350, which seems to be a highly likely target towards which price is heading.With the break above the June highs today, and above key resistance, it shows the resilience of the buyers (bulls) to defy any sort of chart resistance or internal non-confirmations to achieve new highs - it also speaks to the sellers who are having to cover positions by purchasing back borrowed shares.
It’s possible that the shorts covering stops will help give the fuel needed to complete this formation - which has bearish overtones if it plays out as expected.
A broadening formation is a sign that a market is swinging wildly in both directions as neither side can find value and a struggle for dominance is playing out - that’s exactly the case we’re seeing now.
Let’s take a quick look at the S&P 500 which is showing the same structure:
S&P 500:
The explanation is the same for the S&P 500, though it would appear the target would be about the 1,000 area for the pattern to complete.Despite the new price highs, volume barely made a new high in the S&P 5oo for July and the Dow Jones failed to make a new July high in volume. Summertime trading sessions are known for reduced volume so take this into account - though it still is a slight non-confirmation of higher prices.
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