Technically Speaking

The end of March is always exciting as it marks the end of a month, end of a quarter, and brings with it USDA's latest Quarterly Stocks report. However, stocks of a different kind were also in the spotlight as the month came to a close following an impressive rally by the Dow Jones Industrial Average (DJIA).

You'll have to look closely, but you can see on the attached monthly chart the DJIA finished at 17.685.69, slightly above projected resistance at 17,647.84. The latter price marks the 76.4% retracement level of the selloff from 18,351.36 (May 2015 high) through 15,303.33 (August 2015 low). Note that this sell-off looks to be the first leg down of a major (long-term) downtrend.

How do we know that? Take a look at monthly stochastics (bottom study). See how this momentum study stayed above the overbought level of 80% from February 2012 through May 2015 (there's that month again)? Along the way it posted numerous bearish crossovers (faster moving blue line crossing below the slower moving red line) though none of them were able to stop the market's uptrend. That is until the latest one that occurred in March 2015. Yes the DJIA pushed to a new high the following May, but quickly moved to a consolidation period afterward before spiking down in August 2015.

Since then the DJIA has been consolidating once again between two wide-ranging, converging trendlines. The top line is calculated at 17,666.69 heading into April, slightly below the March close. A clear break of this mark could send the DJIA back to near its May 2015 high, where enough bullish momentum could ultimately see the previous major uptrend rejoined and extended.

However, there is a catch. Early Friday morning, April 1, U.S. financial markets will have to deal with the release of March nonfarm payroll and unemployment rate data. While this could send stocks reeling again, recent technical patterns and renewed bullish stochastics would indicate the data could provide support to the DJIA.

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