Updated Monday, 8/25 for Tuesday's market.
Key DOW Levels for 8/26
UP Above 11,700
DN Below 11,300
Major Decline..
Bearish pattern leads to heavy decline, loss of 242 points.
From prior commentary, "...you see today's consolidation has formed precisely at the lower boundary of the large channel boundary, essentially setting the stage for a potential "Kiss of Death" pattern. This pattern is quite bearish..."
The Dow opened the day with a sharp decline away from the 11,600 level this morning and never looked back, as the index dropped steadily throughout the session, ending the day with a loss of 242 points. The Daily and 60 Minute Charts show the Dow performed a perfectly executed "Kiss of Death" pattern and dropped precisely off the lower boundary of the channel that was broken a week ago. This bounce could lead to much more selling ahead.
Typically, the KOD pattern leads to another round of heavy selling in the direction of the original break. This occurs because buyers are testing the waters from lows, but cannot push price above the prior "break" zone, which allows sellers to take control of the trend. If prior lows are crossed at 11,300, much more selling could be seen. Otherwise, look for more range movement between 11,300 and 11,650 before major direction is decided.
Short Term Dow
The Dow closed the day within a very tight range from 11,350 to 11,450, seen in the 5 Minute Chart. Watch this range for early direction at the Open.
Medium Term Dow
In the medium term, we are still out of the market and will watch 11,300 down and 11,700 up; using 25 point stops.
NASDAQ & S&P
The NASDAQ and S&P each dropped sharply right out of the gate and continued lower throughout the session. Look for a potential test at support tomorrow.
Summary
The Dow closed the day sharply lower after dropping from the 11,600 zone. Look for the Dow to test 11,300 support soon.
Thanks for listening, and Good luck in your trading!
Ed Downs
edowns@nirvsys.com
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