A Market Move is Upon Us...But Which Way?
Editors Note: Minyanville is proud to announce that you'll be seeing more long-term macro charts based on the excellent work from www.thechartstore.com. We are confident that these charts will add critical context and depth to our discussions in News and Views as well as the Buzz and Banter.
Ron at www.thechartstore.com provided us with the following chart and it looked worthy of a closer look. It shows a long-term (monthly) view of the Dow Jones Industrial Average (INDU) dating back to 1980 with a 20-month moving average and incorporating Bollinger Bands.
Bollinger bands as you know display a candle chart of historical prices showing standard deviation based bands (an indication of volatility) around a specified moving average. The pupose of bollinger bands is to identify periods of high and low volatility or periods of extreme volatility.
What the chart is telling us is that we could pop either way, however there is no telling when the Bollinger bands will start to separate. It could be a week, a month or more. We saw a similar type of squeeze back in '00 that lasted nearly 8 months based on a quick look.
Keep in mind all of this occurs with the 10, 50, and 200 dma's all converging. Further evidence of a longer-term coiling of volatility as Succo, Bernie and Jason G have mentioned previously.
Actionable? Not really (yet). Worth keeping in mind? Absolutely...
Chart courtesy of www.thechartstore.com
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