Updated Wednesday, 8/13 for Thursday's market.
Key DOW Levels for 8/14
UP Above 11,900
DN Below 11,400
Bottom of Channel..
Dow drops 110 points, reaches bottom of channel.
From prior commentary, "...As we mentioned before, if the Dow remains beneath the top of the channel, we will likely see another move back to the bottom of the range at around 11,400..."
The Dow opened the day with another round of weakness this morning, as the index proceeded to drop back toward the bottom of the large channel, seen in the Daily and 60 Minute Charts. The index bounced just shy of the 11,400 level, but still closed the day with a loss of 110 points.
The Daily Chart shows the Dow is building out within the boundaries of the large, upward-sloping channel, which also resembles a bearish pennant consolidation. Typically, this type of pattern breaks to the downside and does so in a big fashion. Watch 11,400 very closely for signs of a potential downside break ahead.
We will likely see more range movement between 11,400 and 11,900 until major direction is decided, however.
Short Term Dow
The Dow closed the day with a wide range that spans from 11,450 to 11,600, seen in the 5 Minute Chart. Watch this range closely for early direction tomorrow.
Medium Term Dow
In the medium term, we are still out of the market and will watch 11,400 down, and 11,900 up; using 25 point stops.
NASDAQ & S&P
The NASDAQ and S&P each traded lower early in the day, but rallied into the Close. The tech-heavy index is winding up within a very tight triangle pattern, which could spark the next breakout move.
Summary
The Dow ended the day lower after dropping back toward the bottom of the large channel pattern. Watch the boundaries of this pattern, as the index continues to build toward a breakout.
Thanks for listening, and Good luck in your trading!
Ed Downs
edowns@nirvsys.com
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