US stock markets may rally in 2012

DJIA broke above its near-horizontal (RR) resistance at 12250. Its next resistance is the immediate downtrend line (R1-R1) at 12550. See Chart 1 below.


Chart 1: DJIA's daily chart as at Dec 23, 2011 (Source: Stockcharts)

With the DJIA trading above its 200-day SMA line and the 50-day SMA line fast approaching the 200-day SMA line, the DJIA is looking more & more like September 2010. See Chart 2 below. If the 50-day SMA line were to cut above the 200-day SMA line and the index were to break above the 12550, we could see the continuation of the prior uptrend for DJIA.


Chart 2: DJIA's daily chart for 3 years up to Dec 23, 2011 (Source: Stockcharts)

The strength of DJIA is not reflected in the Nasdaq. Nasdaq need to break above its accelerated downtrend line (RR) at 2630 as well as the intermediate downtrend line (R1-R1) at 2690. See Chart 3 below.


Chart 1: Nasdaq's daily chart as at Dec 23, 2011 (Source: Stockcharts)

Like DJIA, Nasdaq is also looking more & more like September 2010 except for one small little detail- the 200-day SMA line is still pointing downward. See Chart 4 below. If the 50-day SMA line were to cut above the 200-day SMA line and the index were to break above the 2690, we could also see the continuation of the prior uptrend for Nasdaq.


Chart 4: Nasdaq's daily chart for 3 years up to Dec 23, 2011 (Source: Stockcharts)

Based on the above, we must be mentally prepared for a recovery in the US stock markets and possibly the global equity markets for 1st quarter 2012.