Love from Spain.Updated Thursday, 1/18 for Friday's Market
Key DOW Levels for 1/19
UP Current Trend
DN Below 10,575
Powerful Rally
Nice reversal of fortune above 10,575. Now, we will likely
pull back slightly and consolidate for the ultimate break
of 10,800. Holding stops at 10,600 and watching the action
develop.
From yesterday's commentary, "...We want to watch for an
upside trendline break at about 10,600 tomorrow. If that
happens, you have to go with it.... I am looking for a new
rally to propel us back through 10,600 - if it does we will
go Long again. Don't anticipate. Go with the flow
above/below our 10,575 level..... "
Hot dog! Nice break of 10,600 right at the start of the
session pushed us on up for a beautiful 200+ point move
today. Nice, indeed. It just didn't seem logical to me
yesterday that such a strong showing above our break line
would fail. My intuition was right this time. In any
event, 10,600 was the place to go Long. We broke it, and
are (long, that is).
Now, if you look at the Daily Chart you can see a good case
for a turn on up through our 10,800 level and to the target
of 11,250. However, we want to keep playing "good defense"
here, and watch our back side. If you look at the 15
Minute Chart, you can see a pullback and consolidation.
Short term, this implies a further move down to the 10,650
zone. We will want to trade this move tomorrow if it
materializes.
Short Term Dow
I would reasonably expect a retracement tomorrow back to
10,650, and if we start down I would trade that move,
looking to go Long at this level for the next wave forming
a consolidation from 10,650 to 10,750. I would expect
Friday to go sideways and a little down, preparing for a
large upside break Monday.
Medium Term Dow
We will keep a loose stop on this thing, holding mental
stops at 10,600 (our entry point). Why? We are in a wide
consolidation and I see good potential for another big
retracement before the ultimate upside break (if that is to
be the outcome). The fact that we defeated the downside
consolidation today gives me tremendous hope and confidence
that the market will now hold above 10,575 and work its way
on up to 11,250. So, a wide stop is called for.
If you are not yet Long, I would wait tomorrow out. We are
near another retracement point, and I think you can get in
a bit cheaper if you hold on the sidelines for the next
downcycle. Remember - markets do NOT just go straight up.
They work their way slowly, scaring everyone in the
process. So, I would expect another downleg before the
upper line at 10,800 is finally broken.
NASDAQ Composite and
OEX (S&P 100)
The NASDAQ performed like a champ today - reversing
perfectly off our 50% retracement level, as we discussed
yesterday. That was a beautiful buy point, as evidenced in
our 15 Minute Chart in Premium SignalWatch (NASDAQ). **
Now, we have rallied back to the upper trendline and are
poised to reverse there for another consolidation before
moving higher. I have to admit that the existence of an
expanding triangle has me a little worried in this chart,
but we will continue playing the moves and waiting for a
definitive sign of trend change.
The OEX broke our clear, upper line at 695 and headed for
the moon as well. We made 15 SP 100 points today - that's
a huge number. We are recommending tightening stops to 703
on that index.
In Summary:
Well, if yesterday was the "scarey" day today was the
"hopeful" day. We had some nasty retracements following
upside breaks, widened our stops, and are now sailing again
in clear open waters. We have a nice upside patterns on
the NASDAQ, with a cautious expanding triangle in the 15
Minute Chart. Great upside break in the OEX with a lower
trendline we are watching, and clear defeat of a downside
consolidation on the Dow for a good looking upside chart
there as well.
So, there's three indexes with most indicators saying "all
systems go" but the nagging caution flags we have come to
respect. I'm suggesting wide stops on the Dow and tight
stops on the NASDAQ and OEX for now, as retracements are
likely on the latter two. But, the overall picture still
says "up from here." Hold those stops at our levels,
which for the Dow is our entry at 10,600. And hang on for
the ride.
Thanks for listening, and good luck in your trading!
Ed Downs
----------------
* Short term vs. medium term. We define short term as 1-4
days, and medium term as 1-4 weeks. This column is designed
for both types of trading/ investing.
** We are now publishing charts on the NASDAQ and OEX (SP
100 index) in our Premium SignalWatch section, with short
and long term assessments, similar to this page. Click
"Subscribe" at www.signalwatch.com for more details.
*** Our software, OmniTrader, includes market commentary
and individual candidates posted each day. To find out more
about OmniTrader, visit www.omnitrader.com.
- end -
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