I still feel that the Dow Industrials remain the strongest of the market indexes on a broader scale. True, there are only 30 stocks in this index, but it does represent a diverse group of industry giants. As such, this is then an index that traders should still monitor and try to determine a trading pattern by which they look to implement trading strategies as it relates to individual stocks they're trading. If we truly believe (and I do) that most stocks will trade with the broader market, then perhaps what we can read into a chart of the Dow Industrials goes hand in hand with what we've talked about recently in the NASDAQ- 100 (NDX) and other market indexes.
Dow Industrials - $50 box
Looking back on the Dow Industrials and then looking forward with past bullish counts and current bearish count may give us insight to what we expect from this index and perhaps the markets. Late last week I was looking for a 150 point reversal in the NASDAQ-100 from the 1,700 level in the near-term and we might also expect the same type of reversal to take place in the Dow Industrials. Currently the bearish vertical count indicates a bearish price objective of 10,400 and would put the INDU just above its long-term bullish support trend. This 10,400 level also coincides with a nice pullback the Dow Industrials had in mid-April. I could easily envision a reversal higher to the 10,800 level before a reversal back low and a test of the 10,400 level. At that point, a trader might be looking to get long some Dow Diamonds (DIA) with a stop at 10,300 then targeting the recent highs for an extended move higher.