Love from Spain.Updated Tuesday, 5/22 for Wednesday's Market
Key DOW Levels for 5/23
UP Above 11,300
DN Below 11,200
Range Bound
Dow breaks 11,300; sinks back into the range. Watch 11,200
down.
From yesterday's commentary, "We are now above 11,300 but
not by much. A breakout to the upside above the range
would indicate enough strength to perhaps carry the market
to 11,500, based on the trading range (consolidation) at
11,250.."
To sum up today's action, "We tried, but couldn't do it."
We did not break out today, although we did see a brief
foray above 11,300 about mid-day, but then sank back into
the range. As I have been saying, we need to see a
sustained break above 11,300 to gain more ground. At this
point, a failure through 11,200 looks possible.
For tomorrow, we will simply watch our boundaries, 11,200
and 11,300 for signs of action. Since today's rally
attempt failed, we have a fair chance that the index is
going to pull back and break 11,200 and need to be prepared
for that. I think the medium term sentiment is still
fairly healthy, and we should ultimately see 11,300 get
broken based on the consolidation at 11,850.
Short Term Dow
If you look at a 5 Minute Chart (not shown here) you will
see that we are at the lower boundary of a downward-sloping
channel. This implies that tomorrow we are going to see an
upside break, and I would be a buyer at anything around
11,275, with stops at 11,240. If we drop through 11,240 you
must assume we are going to 11,200.
Medium Term Dow
I will again have to repeat my earlier commentary for the
medium term; "We are still Long and holding above 11,200.
Once the market breaks 11,300 and holds, we will move our
stop there. As I said above, I would not short this market
in the medium term unless 11,000 is violated to the
downside." Technically, we should still be good to go on
the plus side, unless 11,200 is violated. We are going to
maintain our Long stop there.
NASDAQ Composite and OEX (S&P 100)
The NASDAQ is in an interesting position, with a tightening
consolidation below our earlier target of 2,330. All we
have to do there is watch 2,300 down and 2,325 up. On the
OEX, we have a similar consolidation pattern, with 675 on
the lower boundary and 680 on the upper. **
In Summary:
We still have a positive technical formation, with the
range from 11,200 to 11,300 (plus). Since we did not
definitively break out today, I am holding the index
suspect, and especially with the NASDAQ at an important
consolidation target, you have to surmise that we are
vulnerable for a retracement across the board. As long as
we stay above 11,200 on the Dow, I would say we have great
odds of an upside break and the proper stance is Long. The
NASDAQ, on the other hand, has hit the target of a long
move and should retrace. We want to watch for clues on
direction, such as a retracing NASDAQ and Dow through
11,200, or a strong Dow and an upside break on the NASDAQ
through 2,325.
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
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