Technical’s & Fundamentals Both Negative For US Stocks

The Dow Jones Industrial Average is approaching what looks likely to be key technical resistance, and several technical indicators also signal that an intermediate-term top is approaching.

As the chart below shows, the Dow has been in a steep up channel since the beginning of October, however it is now approaching what is likely to be key resistance (circled). The Stochastic Oscillator (circled) also shows that upside momentum is slowing and may be reaching a short-term top.

A 12 Month Chart Of the Dow with Trend Channels Overlaid on top

Chart courtesy of Stockcharts.com

Other technical indicators confirm that the Dow could be approaching a top. The CCI or Commodity Channel Index (top), which shows a stock’s variation from its ‘typical’ price, is well above 100, and although it has been has high as 200 in the past 12 months, it seldom stays above 100 for very long.

The Williams % R indicator (bottom) shows that the Dow is now at overbought levels and a reversion to the mean must follow.

Technical Indicators: CCI & Williams % R

Chart courtesy of Stockcharts.com

It’s not just the technical outlook that looks bearish for US stocks; the fundamental picture also looks pretty bleak.

US stock markets face a number of headwinds in the first half of 2012, including: slowing global growth, likely Eurozone recession, trade wars with China, stubbornly high unemployment, stubbornly high oil prices, continued pressure from the rallying US dollar, and higher taxes that will come into effect this year. All of which paint a pretty bleak picture.

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