The US benchmark index-Dow Jones – one of the best barometers of business confidence is showing signs of topping.
The chart pasted above reflects that the multi month rally that began in March 2009 is losing steam as a clear sense of exhaustion seems to be settling in. Price action has formed a classic “head and shoulders” pattern and this in itself is one of the most reliable topping patterns in charting analysis. This is significant because we could see the Dow head towards sub 8000 levels by March 2011.
This in turn would imply that the US economy would likely face renewed headwinds and thus be weaker in the next FY: 2011-12 , causing risk aversion and volatility to soar . If the past is anything to go by, we should see the dollar rise in response.
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