Love from Spain.Updated Tuesday, 2/27 for Wednesday's Market
Key DOW Levels for 2/28
UP Current Trend
DN Through 10,600
Holding...
The Dow and OEX are holding up well, in the face of a very
weak NASDAQ. We will be watching 10,600 tomorrow in
earnest to see if the rally will fail.
From yesterday's commentary, "...We got our higher low
today, and we did cross 10,600 as well. That is good.
Now, we want to manage Long positions and hold our stops at
reasonable levels behind the move. Looking at the 60
Minute Chart, I can see a good case for a stop at 10,500 -
150 points away from today's close. That's fairly wide,
but I think we need to give this market some breathing room
until it gets healthier...."
Well, the market is still rather anemic. As I said
yesterday, I am cautiously optimistic that this new rally
attempt will hold, but all of us are concerned about the
NASDAQ right now, and whether it is going to bring the rest
of the market down with it. More on that in a minute.
If you look at the 15 Minute Chart, you can see a very nice
rally from the morning, with a retracement back to 10,600
in the afternoon. We were able to recommend two good
entries today (in our Intraday Alert page) - a break of the
upper boundary off the lows and the retracement from the
range at the highs. The Long/Short play would have worked
out well today - if you could zero in on stocks that were
exhibiting similar behaviours.
But, for the rest of us non-day traders, it was a
gut-wrenching, water torture day with no clear direction on
the Dow. The fact that we held above 10,600 is very, very
good though, and this event should pave the way for
directional bias shaping up tomorrow. We are going to be
watching for a break of 10,600 down - if that happens, the
market is likely to retrace, and perhaps a 100 or more. If
we hold up, the consolidation points to another 300 point
move ahead of us, taking us back to the top of the Channel
in the Daily Chart. I think there is a good chance this
will happen.
Short Term Dow
Yesterday, I suggested, "I am expecting a retracement
through a tight line at 10,620." We got it right at the
Open, but then turned to form a consolidation below 10,600.
The break of 10,600 was nice, indeed. For tomorrow, I am
going to be watching the channel from 10,600 to 10,650 and
see which side is broken.
Medium Term Dow
I think we again have a good case for a morning
retracement, but as long as we hold above 10,600 Tuesday, I
would expect the remainder of the week to float fairly
well. I am tightening up our Medium Term Stop to 10,600
because I don't think the market will rally if that line is
broken.
NASDAQ and OEX
The NASDAQ had a nice upside retracement after dropping to
2,250 - so there was hope. But then, it turned down and
went into a steep descent all the way to the close, leaving
us at 2,208. The point we got to was 62% retracement of the
prior move. The NASDAQ MUST turn immediately tomorrow or
it is in danger of continuing back down to the low at
2,160. The best ray of bullish hope I have is the fact that
the Daily Chart's trendline is in view now, and we could
bounce off it. The OEX behaved much like the Dow, holding
up well and forming a higher low at 647. We will be
watching that level for a push down tomorrow as well.
In Summary:
Today was a mixed bag, with nice positives on the OEX and
Dow, and a terrible NASDAQ. We are now watching 647 and
10,600 respectively, and also waiting to see if the NASDAQ
continues down. If it does, and the other indexes break
their support from today, we will likely see a further
decline across the board and a surprise rate reduction by
the fed. We need to stay limber in here, because it
appears to me that the market wants to go up - all it needs
is a little good news for a change.
Thanks for listening, and good luck in your trading!
Ed Downs
edowns@nirvsys.com
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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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