Weekend review of DJIA, STI and HSI

Volume is an essential tool in technical analysis since in technical analysis, volume confirms price action and this was important tool for market action for the past week.

For the Dow Jones, it broke the August closing support level and is now heading towards the February support level. The striking thing about the chart is that as the index action plunges down all the way, the volume increases with this action and that is confirmation of a very bearish trend.

Dow Jones Industrial Average:


I took a look at the weekly chart and the chart reveals quite a number of things. A trendline was drawn connecting the peaks in 2006 and this trendline was a resistive trendline which turned into a supportive trendline for 2007. This trendline support was broken this week with very heavy volume and currently it is landing on the February support. Let's see whether this support will hold.

Dow Jones Industrial Average Weekly:


Since the Straits Times Index has been revamped with the addition of new components and a downsizing of the total number of components, i am playing safe by choosing only to evaluate the STI after the 10th Jan. The new STI in my opinion is less useful since it has less components though there are other new indices which were created along with the revamp of the STI which can overcome the shortcomings of the new STI. However, STI still plays a huge part since most speculators are still sentimental towards the STI. This can be seen in forums where people suggest that 3300 is an important support level though the STI has been revamped.

There was a gap down on 3 closings ago which can act as a resistance technically and this gap was not covered back so things are still bearish.

Straits Times Index:


The same goes for the Hang Seng Index which had a gap down but this gap was not covered back at all. However, HSI seems to be resting on the 200d MA.

Hang Seng Index:


Overall, i am still bearish on the indices. There is still no higher highs and higher lows for the indices. Furthermore, the volume has not decline yet although i must say that the market is getting used to the downfall. Barring a market capitulation, i believe in my humble opinion that there is still some more downfall to go.