Love from Spain.Updated Thursday, 5/17 for Friday's Market
Key DOW Levels for 5/18
UP Through 11,300
DN Through 11,200
Consolidation
Dow consolidates between 11,200 and 11,300 providing a road
map for next week.
From yesterday's commentary, "..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..."
Today, we saw the market behave in a way that implies a
healthy state, in that it consolidated just below the high
at 11,300. When this happens, a market will usually
advance on a breakout of the high. However, you can also
use consolidations like this for "reverse" signals - if
this one breaks 11,200 we should see a sizeable
retracement, probably back to 11,000.
Short Term Dow
In the 5 Minute Chart, we have evidence of a retracement
tomorrow taking us back to the 11,200 zone. As I indicated
above, I would expect the market to move sideways and break
the high. We want to trade the range between 11,200 and
11,300 tomorrow, and also trade the breakout.
Medium Term Dow
In the medium term, we want to hold Long above 11,200 which
is where we will move our stop. If we cross down through
11,200 we will exit Long. I would not short unless 11,000
is violated.
NASDAQ Composite and OEX (S&P 100)
The NASDAQ consolidated from 2,170 to 2,220, giving us a
nice indication of potential, further upside for the same
reasons I discussed on the Dow above. If we break 2,170,
however, we should see a fairly strong retracement of
something like 50 points. The OEX is also consolidating
above 664, with 670 as the high of the range. Same dynamic
there as well - we are watching both boundaries for breaks.
**
In Summary:
We have consolidated at the high, which is a good thing.
Keeping in mind that the Dow is near its all-time high, we
are cautiously optimistic and must remain Long and trade
further breaks out of the range which has formed from
11,200 to 11,300. Whichever way it breaks is the way we
should go. As I have said, this type of pattern will
usually break to the upside.
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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