Drop and Pop
Dow opens session lower, but trends higher to the Close.
From prior commentary, "...the Dow continues to trade within the expanding trading range seen in the 60 minute chart. Within this context, the overall bias remains intensely bearish. However, we may witness a period of consolidation in the near term..." The Dow opened the session sharply lower right from the outset this morning, as the index pushed the lower boundary of the expanding range a bit further, as seen in the 15 and 60 Minute Charts. The Dow later found 'footing' at the bottom of the channel, as the index rallied back toward new highs for the session, closing the day higher by 48 points.
The 60 Minute Chart shows the Dow continues to trade within the boundaries of the wide, upward-sloping trading range, which we will continue to watch. Look for the Dow to continue trended higher within the boundaries of the pattern before a definitive break occurs. Further volatility is very likely within this range, so watch for a clean break for signs that a continuation is likely to follow.
A downside push through the bottom of the range at 10,100 should yield another big decline; while a break above 10,265 should make for continued strength within the range. However, true strength will not enter the market unless 10,360 is crossed to the upside.
From a longer term outlook perspective, it looks as though the Dow is gearing up for another big decline within the current downtrend, seen in the Daily Chart. As long as the index stays beneath the key upper trend line, seen in the Daily and 60 Minute Charts, further weakness is likely. However, should a break at this line occur, a change of trend may lie ahead.
Short Term Dow
Short term, the Dow has formed a tight consolidation at the highs of the 5 Minute Chart from 10,175 to 10,220. Watch for a break from this range for movement at the Open tomorrow.
Medium Term Dow
In the medium term, we entered the market Short at 10,091 today, but stopped out with a 20 point loss due to the reversal. We are now out of the market and will watch 10,100 down, and 10,360 up; using 20 point stops.
NASDAQ & S&P
The NASDAQ and S&P each filled morning gaps this morning, setting the tone for steady advances to the Close. Look for each to remain within their respective trading ranges until a decisive break occurs.
Summary
The Dow continues to trade within the boundaries of the wide, sloping trading range. The index is generating steam within this range and will likely get a solid break and continuation once a definitive violation occurs. Watch for continued volatility within the range before the big break happens.
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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