INDEX UPDATE
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On Friday the DOW got as low as 7530 and strongly bounced hard to the upside about 290 points, then closed about 30 points below the intraday highs at 7784. Many may only see that it rose 152 points, but that is far from the real picture, which is that the DOW closed 260 points above the intraday lows.
260 points is a very strong rebound. Now the question is whether this strong rebound substantiated by technical support. The market internals for the NYSE did improve, but only a little. The NAZ was only up 2 points, and the RUT actually closed slightly negative. Such is giving the impression that the money was going back into the same old thing - the big stocks, and that the rally was far from being broad based. My feeling is that this rally did not have technical strength, but more of a reflex/momentum stunt.
On the way down the DOW broke thru the LOWER TRENDLINES of the RISING WEDGIE and FLAG PATTERNS, and also broke thru 2 minor supports at 7890 and 7713. The key is that it did it in 2 days - we are talking about breaking 4 support positions in only 2 days. Some may just look at the rebound of 260 points and disregard the negativity that broke 4 support areas in 2 days.
On the way up on Friday, if we turn the support area of 7713 into a resistance point, the DOW did surpass it to the upside, which is a positive sign, but relatively minor.
Yes the support at 7500 did hold, but keep in mind that the DOW crushed thru 4 supports and produced 2 LOWER LOWs (breaking 7890 & 7713) in only 2 days.
Here are the following resistance lines for the DOW:
7952
8032
8090
8182
On a technical basis, I feel that unless the DOW sets a new high above 8182 immediately within this upswing, not future upswings, the DOW should break the 7500 support, which implies a break of 7400 also. Depending on how long this rally lasts( I dont think it will last long) the next downtrend should start within the period of OCT 7-13, as mentioned in my earlier post. Hey it could possibly start tomorrow also.
Subjectively, the news from the economic meetings could give a temporary push to the market, but how long will that last - a few days, hey maybe only a few hours in this volitile market. So what other good news is on the horizon. Earnings should start coming out in force, I believe, during the week of OCT 12 - so can we expect good earnings that week to help boost the market??????? Unless the earnings are above expectations there wont be much that can hold up/push up this market. Just a few negative reports from large companies will really hurt, and just meeting expectations may not be enough in this negative market.
Also, I heard that many will be getting their 401K monthly reports next week.
Seeya |
