Love from Spain.Updated Tuesday, 3/20 for Wednesday's Market
Key DOW Levels for 3/21
UP Above 9,800
DN Current Trend
Fed News Reaction
The markets turned on a dime as the Fed announced the
expected 50 basis point reduction. Consolidation failures
abounded, telling us to get out of this market, at 2pm
Eastern.
From yesterday's commentary, "My best advice for our medium
term investors is to wait this out for a few days, and see
if we can form a true, basing pattern. The last thing you
want is to buy in a reaction rally and then see the market
fail through the bottom. We are still vulnerable..."
Yep. Still vulnerable all right. We all had high hopes
today that the morning consolidation would culminate in an
upside move, but the Fed news was not what the market
wanted to hear, and we quickly pushed back down through our
downside point of 9,875 and headed lower - a lot lower. We
had clear warning to get out of its way, and did, plus we
went short on the break through 9,875 which puts us in a
profitable position on the Short side.
Now, we are below the lowest low at 9,800 and falling.
Looking at the Weekly Chart, we can see that the Diamond
Pattern may, indeed, culminate in a failure. For those who
have not read this page before, diamonds are rare patterns,
and imply moves down a distance equal to their height.
Since this one is about 2,000 points in size, and the low
is around 9,800 we have a case for a market moving down to
about 7,800. That's a lot.
Will this happen? Hard to say. All we know is the market
is very weak right now, and the patterns suggest continued
downside movement to the ultimate low. What we will be
doing on this page is watching for a reversal and a higher
low to form (as we have before) and then gingerly enter
Longs with tight stops. Needless to say, the markets are
still in trouble, and we have to respect the trend.
Short Term Dow
You can see the sharp trend in the 15 Minute Chart, and I
would use this for short term moves tomorrow. Up through
about 9,750 and I would be a short term buyer, down through
the low at 9,700 and I would sell - BUT beware of the "tail
fake" phenomena, a sudden gap at the Open. Give it at
least 20 minutes before entering. I would expect for waves
to set up here - for example, up 75, down 150 or down 100,
up 50. Be ready to trade the trendline reversals in the 15
Minute Charts.
Medium Term Dow
In the medium term, we exited our Long from 9,825 at 9,900
for a meager 75 point gain, and are now Short. This thing
could get really going and head on down to our target of
7,800. Can't predict that - it's a long ways down there.
But, we are going to hold short on the assumption that the
trend is down, until 9,800 is crossed and a higher low
forms (holding our stop at 9,900). If we continue down, we
will look to take Short profits in 9,500 zone.
NASDAQ and OEX
We were concerned about going Long the NASDAQ, and that
concern bore fruit today. A consolidation failure right
after the fed news told us we were in big trouble, and in
our Intraday Alerts we posted a "short stance" at 1,950 as
the market dropped through. We continued 100 points down,
below the lowest low. We have similar trendline potential
in the short term, and even better opportunities to trade
the moves on the OEX over the next few days. **
In Summary:
Yesterday, we indicated that we were "well aware that we
have a large Diamond in the Weekly Chart, which appears to
be failing. We still need to be careful." That was a good
idea today. Is the market going through the floor? Yes.
Is it going to stop any time soon? Too hard to say, though
the technical evidence in each index points to another 10%
to 15% or so of downside before a true bottom can form.
Our strategy will be to watch for signs of a bottom and
take cautious Longs, as we did on the last upside break.
As long as we hold fairly tight stops, we should not lose
money doing this, but will be "in" for the actual recovery,
whenever it comes. It's just a matter of time.
Thanks for listening, and good luck in your trading!
Ed Downs
edowns@nirvsys.com
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the top or "Member Upgrades" at the left for details on our
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Definitions:
Short vs. Medium Term: The short term is defined as 1-4
days. Most short term commentary is relevant to day traders
for the following session. The medium term is 1-4 weeks.
*** Fulcrums: A fulcrum is essentially a "line in the sand"
or "demilitarized zone" in the battle between bulls and
bears. These lines, identified by experience, are
equilibrium points between buyers and sellers, and are
usually found in the centers of consolidations (trading
ranges). When price moves away from a fulcrum, it usually
moves quickly and a great distance.
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LINKS TO CHARTS:
Dow 15 Minute Chart
signalwatch.com
Dow 60 Minute Chart
signalwatch.com
Dow Daily Chart
signalwatch.com
Dow Weekly Chart
signalwatch.com
legend
signalwatch.com
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