Love from Spain.Updated Tuesday, 3/6 for Wednesday's Market
Key DOW Levels for 3/7
UP Through 10,600
DN Through 10,550
Blast Off
Dow and other indexes take off and break their upper
trendlines. Wednesday will be the day that tells us if the
new direction is going to hold in the medium term.
From yesterday's commentary, "In the 60 Minute Chart, we
have a very long trendline coming down from the highs.
This is the kind of multi-touch line I pray for on the
Dow... We have a great setup for a rally - now, we just
need to see if it follows through. Use 10,500 as a fulcrum
on the Dow - Long above and Short below. That is where the
center of the action is right now..."
Woah. That was some gap at the Open, with hard upside
pressure the first 45 minutes of the session. We watched
from there, hoping for a consolidation at the high, but
frankly, the launch was too much for it. I heard reports
that inclement weather might have affected the market in
New York, but to me, we have a classic "fearful" bull
market scenario here.
Why do I say that? Look at the 60 Minute Chart. You can
see the long trendline going across highs. The fact that
we shot through this line implies a new bull is in play,
but this market has been disappointed so many times, when
you have a move of that magnitude everyone is waiting for
the other shoe to drop. Therefore, fewer buyers at the
peak, therefore we have a slow, sideways decline like the
one we saw today.
So, we pulled back to our 10,600 line (actually just below
it) and stopped at the Close. This is actually good news.
We have formed a downward-sloping wedge in the 15 Minute
and have really good odds of breaking the upper line in the
wedge and going higher. We are going to hold our medium
term stops at 10,550. I don't think we will have to use
them, though.
Short Term Dow
It's going to be "easy pickin's" tomorrow, I think. Watch
that line at about 10,600. If it is crossed, go with the
flow and expect a rally of 50 to 150 points. On the other
hand (yes, there always is the other hand) if we fail and
cross 10,575 you must short and hold on, with stops at the
same level. I do think the market has tremendous odds of
rallying, but our job is to play of what it does.
Medium Term Dow
We are now Long with our mental stop at 10,550. This level
is the approximate trendline boundary, in the 60 Minute
chart. If we cross 10,550 down tomorrow, we will have to
stand aside and wait for the next impulse move up. I do
not think going short is prudent at this juncture.
NASDAQ and OEX
It's amazing how much the NASDAQ likes to gap at the Open.
All that activity in the aftermarket just plays havoc with
the numbers. I was expecting an upside break, but not a 60
point gap. The sad thing is, with the gap we formed an
island. Remember the one that formed a few weeks ago? It
pulled right back in the channel. We will be on the edge
of our seats to see if the NASDAQ pulls back down to the
2,150 zone tomorrow. I think it has good odds of holding
its gain this time. We will see. The OEX looks a lot like
the Dow, with a strong pennant consolidation and reasonable
probability of an upside brak through 646. A break down
through 644 should be sold. **
In Summary:
Well, we have a nicely bullish pattern (in my opinion) on
the OEX and Dow, but the NASDAQ is a total question mark.
It should rally, but we have a very recent case of an
identical pattern failing, so I can't call it until we see
the Open. Any draft down through 2,200 will be suspect. On
the Dow, if we break 10,600 again right at the Open, that
will be an excellent sign for a new wave up.
Thanks for listening, and good luck in your trading!
Ed Downs
edowns@nirvsys.com
---------------------
** NASDAQ and OEX Charts for today's market are available
to members. At signalwatch.com, click "Become a Member" at
the top or "Member Upgrades" at the left for details on our
various service levels.
---------------------
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.
---------------
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. |
