Love from Spain.Updated Friday, 6/1 for Monday's Market
Key DOW Levels for 6/4
UP Above 11,025
DN Below 10,975
Back to 11,000
Reaction rally could hold. Use 11,000 as the dividing line
Monday.
From yesterday's commentary, "We are still short from
11,000 and watching to see if the decline is going to
accelerate. I am suggesting staying away from the Long side
until 10,975 is crossed, and then holding stops at 10,900.
Most likely, we will rally some tomorrow, and then turn
down for the next leg of the retracement. Our cover stop
will be held firm at our short entry point of 11,000..."
Today was a wide swing day, confirming the 10,850 to 11,000
range. The fact that we rallied back to 11,000 in the
afternoon is less significant than the fact that we appear
to be consolidating at this important number. We are going
to have to watch and see which way the market breaks to
determine whether this is a reaction rally or the start of
a new move into the broader channel.
Because we are back to our critical number (11,000) I think
Monday is going to be much easier to trade than today was.
If we use 11,000 as our "fulcrum" - Long above and Short
below, we should be able to establish a position on the
"right" side of the market for the next timeframe.
Short Term Dow
In the very short term, watch 11,000 up and 10,990 down.
Either way should give us a directional bias, since 11,000
crosses an upper trendline in the 5 Minute Chart and 10,990
a lower one. Hold stops at the entry.
Medium Term Dow
We covered our Short position on the upward crossing of
11,000 - which was also our entry point. I was expecting a
rally, but at the start of the day rather than the end. If
you step back from today's action and examine the swings,
you see an expanding triangle - an unstable pattern.
We are likely to retrace Monday, but will watch 11,025 up
and 10,975 down for entry points on either side of the
market, Long or Short. I am suggesting entering in the
medium term on this basis because we have sufficient
dynamics building around the 11,000 level to suggest a
strong move in either direction away from it.
NASDAQ Composite and OEX (S&P 100)
The NASDAQ has moved back to, and through 2,140. While at
first glance, this looks bullish (2,140 is an important
level, below a significant gap), you have to look at the
wider timeframe, in the 60 Minute Chart. Here we see that
we have formed a pennant consolidation, and therefore will
be watch 2,120 ernestly for a failure. The OEX formed a
similar pattern, and is also at resistance of 650. **
In Summary:
We are above 10,950 and showing a reasonable chance to
rally Monday through 11,000. I would simply watch the
critical level closely and try to get on the side which
breaks. My expectation would be for a downside break,
since we did not form a higher low in this last session.
But I think either direction will be tradeable Monday.
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
signalwatch.com
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