Taken from Signal Watch:
Market: Analysis of the Dow
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Updated 2/8 for Friday's market.
Key DOW Levels for 2/9
UP Through 10,920
DN Through 10,850
Approaching Support
Watching 10,850 for a bottom, or a break of 10,930 for new Longs.
From yesterday's commentary, "...If we start down, short at 10,940 (again). This is a trading range market, so you can expect lots of up/down behavior. As an intraday trader, you can catch the moves, as we did today, but you want to go with the major trend changes - not the little blips up and down...."
Today was definitely not a "blippy" day. We started down from the Open, crossed 10,940 and never looked back, except for once small consolidation towards the close. All in all, we were able to rack up about 60 Dow points on the Short side. Not too bad. Of course, we are still on the sidelines in the medium term, having exited on the FIRST crossing of 10,940. Now, daylight may be shining..
If you look at the 60 Minute, you can see we have formed a very nice channel - in fact, it's one of the nicest channels I've seen on the Dow in a long time, with a current upper intersection point at about 10,930. Typically, when you have long sloping downtrends like this, they beg to be broken at the upper line. That will be our "go long" point, when it is crossed.
On the short side, we have our primary, critical support level at 10,850, and we are certainly within striking distance now. My "best sense" is that we will bounce off this level and head back up to break the line, but please don't anticipate this. If we break 10,850 we WILL go short, with cover stops at the same level.
Short Term Dow
In the very short term, I am expecting a pop (up) at the Open, since we are so close to the support level at 10,850. If we break 10,880 quickly, I would go with it and hold your mental stop at 10,870. If we drop instead, watch that 10,850 level for action, and set your "fulcrum" there.
Medium Term Dow
In the medium term we are still "out" and waiting for the upper line to be broken in the 60 Minute Chart. We are forming an expanding triangle with a flat bottom, which is troublesome. This type of pattern is most often broken at the lower line. But, we have an upside consolidation in the Daily Chart (marked), that suggests an ultimate move to 11,250. To me, that pattern is stronger, so I think that is the way it will turn out. Again, don't base any trades on my intuition. Go with the levels - 10,850 down and 10,930 up.
NASDAQ and OEX
Woe to the poor NASDAQ. Down, down, down. We caught the downdraft from the upper trendline turn at 2,650 and rode it down most of the day (see Intraday Alerts), making some very nice gains on the Short side. But, that doesn't help the medium term folk much. I'm still looking for an upper trendline break, similar to the Dow, at about 2,620. When? Can't say. We may continue down to 2,500 first. It's a day-by-day kind of thing. The OEX is about to break an important line in the Daily Chart, which has me worried there but same story - long, tight trendlines to the upside at about 700. We are holding our fulcrum firm at 704 for now.
In Summary:
Still fearful out there. However, I am beginning to see signs of a medium term bottom at the 2,500 NASDAQ level. We are watching upper trendlines on each index, ready to jump on the bandwagon if they are crossed for the nice profits which are sure to come on the Long side. In the meantime, all we can do is day trade the swings (which have been extremely profitable) and wait for the "big one."
Thanks for listening, and good luck in your trading!
Ed Downs
edowns@nirvsys.com |
