Clearly, the index is at the bottom of a triangle. Although the situation looks dire, the next move should be up.
If I interpret the triangle as an Elliott Wave triangle, it hasn't completed. The next move should be leg E up. However, using the same Elliott lens for interpretation, then one should expect the price action to be down after that point. E should end around 87.73 but the last waves of EW triangles often fall short. If this happens, I'd look for it to be about 83.65 or 85.00. The latter is about the point the long-term downtrend line enters the picture. This assumes you buy into EW theory. While I do find it sometimes useful, it's not a guaranty of anything and it can be useless.
One can look at this price behavior as basing behavior. Long downtrends don't turn around on a dime as it were. Notice that it is an upward trend line from the lows.
What about the lackluster performance of RSI? Given the overwhelming sentiment against the USD, this isn't surprising. However, from a technical point of view it's negative. Offsetting that, though, is the fact that RSI is also not plunging to oversold levels below 30 on each dip.
Until the index drops below 75.62, I believe there's going to be upwards movement in price. If it does begin to slide, watch if it moves below 74.16 because that would be the confirmation point for a double top and the hint that there will be new, heart stopping lows.
Here's the monthly chart:
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
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