Massive Reversal
Dow rallies at Open, but gets huge sell-off from early highs.
From prior commentary, "...The index closed the day right at the key 11,250 resistance level, which has held for the last two and a half months. If the index can finally break through this zone with conviction, we will likely see big strength..." The Dow got a huge upside break through 11,250 today, which sparked a furious 100 point advance to begin the session, as seen in the 15 and 60 Minute Charts. However, the Dow got a sharp v-top reversal from the day's highs and proceeded to sell off 160 points in steep and steady fashion. The index bounced late in the day and eventually closed the session with just a 2 point loss, but we could see much more selling ahead.
Today's failed breakout opportunity is bad news for the bulls and huge for the bears. Basically, the fact that the Dow was not able to maintain new highs indicates big weakness ahead and could cause another big test of critical support at 10,700, seen in the Daily Chart.
The Dow continues to hold above the major lower trend line from the 60 Minute Chart, which we will watch closely for early weakness Monday. A downside break of this line at 11,185 could spark a huge decline early next week, especially if support is violated at 11,075.
The index could continue to struggle in the 11,250 zone in the near term, but true strength will not be seen unless today's highs are broken and held above 11,350.
Short Term Dow
The Dow closed the day beneath the 11,250 fulcrum, seen in the 5 Minute Chart. Watch this zone closely for early direction Monday morning.
Medium Term Dow
In the medium term, we closed out Longs at the entry today, due to the Breakeven Rule and are now out of the market. We will watch 11,375 for Longs, and 11,175 for Shorts Monday; using 20 point stops.
NASDAQ & S&P
The NASDAQ and S&P each reversed sharply from opening highs and could be headed much lower if key lower trend lines are violated. Watch these lines early next week.
Summary
The Dow got a massive downside reversal after racing to new highs right at the beginning of the session. This does not bode well for the bulls and could become the top of another bearish decline back to 10,700. Watch the key lower trend line at 11,175 for early weakness Monday.
Thanks for listening, and Good luck in your trading!
Ed Downs
edowns@nirvsys.com
with assistance from..
Frank Ochoa, Sr. Market Analyst
fochoa@nirvsys.com
** Note: We are now posting Index entries and exits in Real Time, through our new Intraday Index Alerts service. To learn more about the service, visit SignalWatch.com and select Intraday Alerts from the main navigation bar. - SW Team
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