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Dow Jones Industrials Av. (INDU)

12,247

A common truth is that overall a bear market closes up more than it closes down. But when it falls, it falls much lower. We wouldn’t say we are in a bear market, but the Dow showed an interesting pattern recently, with a series of consecutive positive sessions, then a massive 300-point plunge last week (Friday 29 February).

There were rumours at the start of this week that the Fed might cut the discount rate, and the sharp dollar weakness, which sparked the equity sell-off, shows again investors are running for safety to assets such as gold, approaching the $1000-an-ounce mark.

These seem good reasons to short-sell the US blue-chip index in the short term, and Warren Firth, investment advisory consultant at IG Markets, says that from a purely technical perspective a dip below 12,200 would trigger further falls, taking the index down further.

Last Monday (3 March) this level was broken in intra-day trading so we go short for the time being.

ACTION: SELL Dow Jones • Target 11,630 • Stop loss 12,615

TIME TARGET: 3 WEEKS