If you like fireworks in the Dow Jones Industrial Average (DJIA), October is your month. According to one source; of the 10 largest daily gains (by percent) 3 have occurred during October, along with 5 of the largest daily losses (again by percent). This past weekend saw the coming and going of Halloween, meaning October 2015 is now a thing of the past.
But what a month it was for the DJIA.
As its monthly chart shows, the DJIA posted a strong rally to close last Friday at 17,663.54, up 1,378.84 points from September's settlement. This was above technical resistance at 17,358.68, the 67% retracement level of the sell-off from 18,351.36 (high from May 2015) through 15,370.33 (low from August 2015). Note that this latter price was a test of support at 15,547.35, the 23.6% retracement level of the previous major (long-term) uptrend from 6,469.95 (March 2009) through the May 2015 high.
The solid rally by the DJIA also established a bullish crossover by monthly stochastics (bottom study, faster moving blue line crossed above the slower moving red line) though well above the oversold level of 20%. From a technical point of view, this would indicate the major downtrend established last July (for further discussion, see the blog post from September 1 "China Fed the Dow") is still in place.
Could the DJIA test its May high? Absolutely. The bullish change in momentum (monthly stochastics) opens the door for a possible extended rally. Seasonally the Dow tends to rally through the end of year, so bullish momentum would not be unheard of. The question will be whether the DJIA can move to a new high in 2015, or will it rejoin its major downtrend in November.
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