Daily Diamonds - Volume And Resistance Insights

There’s interesting slightly conflicting technical signals on the DIA (DIA) - the Dow Jones ETF daily chart.  We’re seeing bearish overhead resistance confirmed by a bearish non-confirmation in volume… which is developing underneath a positive momentum divergence.  Let’s see if we can sort this out.

DIA Daily chart:

I separated the volume bars to highlight the non-confirmation or negative divergence in volume that appears to be coming to a resolution (as price moved higher, volume moved lower).  Generally this is quite a bearish development, and the resolution is expected to resolve to the downside (under the hypothesis “Volume Precedes Price”).

Also on the bearish side, we have key resistance coming overhead from the falling 50 day EMA, which has held as resistance officially three times since December.  Notice on the last test, price formed a “doji” (specifically a tiny ‘gravestone’ doji’) which is bearish at resistance.  Price scuttled four days to the downside following this technical development.

Also, regarding the momentum oscillator, if you look extremely closely at the last three mini-price swings, we see that they formed a mini flat-line divergence (actually a small negative divergence) which, when combined with overhead resistance and a developing volume divergence… that paints an unfavorable picture for the bulls.

Price is coming off (resolving) a positive momentum divergence, but it’s possible the divergence has already worked itself out of the system, having retraced to its target of the 20 (and then 50) day EMA.

Price has also broken beneath a small-scale rising trendline (blue line) which is also unfavorable for bulls.

Larger scale support at roughly $80.00 still seems to be in-tact, but if bears take us beneath that level, do look out below.

Keep watching this chart and the other US Equity Indexes for clues of possible price moves.  Time’s running out for the famous “Santa Claus” rally that often occurs at the end of the year.

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