Is it time to book Dow profits?

Price at time of writing – 16,072.

With the Dow having advanced a further 311 points since my last update, the index has now moved into dangerous territory.

My long-term target at 16,175 is the likely point of gravity within a broader target/resistance band defined as 16023-16186. The Dow is currently probing deep into this broader target band, and we have to consider closing our long-term long position entirely. Also, a strategy defined to profit from an impending fall should be on the table now.

Let's take a look at the facts suggesting we should book Dow profits immediately. The S&P 500, the other major US share index, has already fulfilled my major upside target at 1791. As I mentioned in  last week's S&P 500 update, the index may take a little while to fall – particularly as the Dow provides tailwinds of support as it moves to complete its own target. But the index is now unambiguously on my short sell list. Other global share indices have also fulfilled major or intermediate targets by recently hitting my resistance levels. These include Germany's DAX, along with the benchmark indices of Australia, Belgium and Spain. Influential shares such as Vodafone have also completed moves to intermediate resistance. Further, ten- to thirty-year treasury yields are poised to rise to levels which will chill the corridors of leading central banks battling to nurture economic recovery.

On balance, with the Dow having recorded an intraday high of 16,120 yesterday  – just 0.34% shy of my target – it is time to take our profits and run. The risk of holding a long trade has now become too high.

Recommendation: take profit on long positions. Sell the index short on any further rise to 16,175. 

Dow Jones chart

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