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A Midyear Technical Checkup for Stocks

But that is still a very long-term look. Let's move in closer and see where we are within that broad pattern. On the chart below, we are seeing the last year of Dow Industrials trading, depicted on an Equivolume basis.

Dow Industrials, 52 Weeks
Source: Metastock

Here we are seeing the very regular cyclicality. It looks as though the Dow is making a low just about every three months. That suggests the next cycle low will show up in July. Then we could start a new cycle, again giving us a high in six weeks or so and a low in three months, plus or minus.

The other feature of this chart is the apparent breaking of the uptrend line going back to August of last year. That tells us of a major change and hints that we should not be looking for a new high on the next up cycle. In fact, we are likely making a big head and shoulders and are now at the neckline. That would suggest we are going to be, by the end of the year, lower than we are now, but with a tradable up-cycle in between.

At time of publication, Arms had no positions in the stocks mentioned.

Richard Arms is a renowned stock market technician who invented the Arms Index (often referred to as the TRIN), which has become a mainstay of market analysis, appearing in The Wall Street Journal and Barron's. Arms also developed the widely used technical method Equivolume Charting. Since 1996, he has been publishing the Arms Advisory newsletter for money managers and financial institutions. He also has authored Stop and Make Money: How to Profit in the Stock Market Using Volume and Stop Orders, Profits in Volume, Volume Cycles in the Stock Market, Trading Without Fear and The Arms Index, and has been honored with the Market Technicians' Award for Lifetime Contribution to Technical Analysis. Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks. Richard appreciates your feedback; click here to send him an email.

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