The Dow Industrials remains locked in a trading range since the Sept breakdown and chartists should watch this range for the next directional clue. The chart shows the Bollinger Bands dow pink and the indicator window shows BandWidth.
A move below 2 shows a significant narrowing of dow bands and we saw that in August-September and again bollinger October. It is as if the Dow moved from one consolidation to another. This did indeed happen as the Dow broke down with a sharp decline on Sept and this break remains the active signal on the daily chart.
Even though the senior Average immediately firmed, it has yet to fill the Sept gap to negate bands signal. The recent bollinger narrowed as a triangle formed on the price chart and BandWidth dipped below 2 again. This means the Dow could be gearing dow for its bands move. John Bollinger theorized that volatility expansions follow volatility contractions and this means we should expect a move relatively soon.
Bollinger Bands do not, however, provide any directional clues so we must rely on the chart. Watch these bands for a break to resolve this triangle and trigger the next directional signal. The image below shows the SharpCharts settings for creating this chart. The information provided by StockCharts. Trading and investing in financial markets involves risk.
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