Love from Spain.Updated Wednesday, 5/16 for Thursday's Market
Key DOW Levels for 5/17
UP Current Trend
DN Through 11,000
Huge Move
The Dow bounced off 10,820 and never looked back. Now above
11,000.
From yesterday's commentary, "..if we take out 10,900 I
would consider Longs for the break of 11,000. This is one
time you do not want to rely on predictions - mine or
anyone else's. It's an unprecedented point in the chart
and could break hard - either way. Watch 10,840 down and
10,870 up..."
Well, shazaam. I'm sure glad I added this comment
yesterday. The market turned on a dime at 10,820 and lit
up like a rocket, pushing all the way through 11,000.
Truly amazing. Looks like it took the market a day to
think about things.
As we discussed, we went Long through 10,820 and held our
stops there from several days ago. So, we are still Long
and pretty happy about it. No doubt about it, we are in a
wild, unstable market. Anything is possible.
For Thursday, my technical measurements tell me a
retracement is due, primarily because of the strength of
the move through 11,000. This would be a logical next step
- a retracement back to about 11,000. So, that is where we
will keep our stop. If you look at the Weekly Chart, you
can see how important the 11,000 level is. Getting and
staying above it is largely bullish.
Short Term Dow
In the short term, we have a well-defined line through lows
intersecting at 11,200. Watch this level for a break, and
Short it, waiting for a 50% retracement to about 11,140.
If we rally, I would hold off until the retracement
actually occurs. And, it will, of course.
Medium Term Dow
In the medium term, we are Long above 10,820 (or 10,870 if
you traded the breakout) and watching to see what the
market does next. If you are not already Long, I would
wait for a retracement back to the 11,100 or 11,150 zone
before buying, simply because we should see a retracement
here, and we have a volatile market. We are within 500
points of the all-time high. We need to be careful.
NASDAQ Composite and OEX (S&P 100)
The NASDAQ solidly broke 2,090 and then 2,100 an hour into
the day, pushing up to 2,167 by day's end. The OEX pushed
through 650. So, we have strong confirmation across the
market that a rally is underway. We are expecting a
retracement and watching our stops at NASDAQ 2,150 and OEX
660. **
In Summary:
Yesterday, I indicated "If the market can mount a rally
through 10,900 we have a good shot at breaking 11,000 in
the short term." Now that we've done that, with a huge,
343 point gain on the Dow, we have to wonder what is in
store for the last two days of this week? Whenever you
have a long, strong move like this, you typically see a
retracement. We will watch for it, expecting a pull-back
and consolidation to develop above Dow 11,000 before the
next advance. Obviously, 11,000 is our new fulcrum on the
Dow.
Thanks for listening, and good luck in your trading!
Ed Downs
edowns@nirvsys.com
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Definitions:
Short Term 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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