Week beginning 4th July

The first day of what promises to be a defining week for the markets.  Last week we witnessed a very strong 5 days for the indices, with the Dow gaining over 650 points. The question is can it continue at this rate? We will get some consolidation prior to another leg up? or was last week merely a brief respite in a bear market?

I like to use the Dow as the barometer for general market direction, and have attached this chart.

We can see a long running bull channel which the Dow fell out of at the beginning of June.  The powerful run last week saw it plough back through the lower trendline so we have to believe that the bull run is back on.

However i want to wait for conviction of this by watching how the Dow copes with a few points of resistance close to its current level.

We can see a downward sloping channel could provide resistance around the 12,630 mark.  This level also ties in well with previous resistance on 16th, 19th and 20th June, which are circled in the figure. If these can be convincingly broken we might then get  few days consolidation before an assualt on the 13,000 mark begins.

There does appear to more uspide in the indicators attached to the chart. RSI is at 66 so technically is not overbought and is below some of the values we've seen in the 2009+ bull run. MACD shows no sign of turning down for now, and again is below some of the values from the bull run. Perhaps more upside remains.

So an interesting week in store. Monday is a public holiday in the USA so perhaps less movement in the FTSE with the Americans enjoying their Turkey.  We will see how Asia kicks off overnight on Sunday before considering a trade for Monday, but i'm expecting an early rise on the FTSE followed by a slow drift down for the rest of the day, leaving the way for the Dow to challenge the above resistance points on Tuesday.

Good luck