Signal Watch Light bearish:
Updated Saturday, 2/5 for Monday's Market
Key DOW Levels for 2/7
UP Through 11,100
DN Through 10,900
"Triangle Consolidation
Be ready to act fast Monday if a decline starts."
Thursday, we indicated, "From everything I can see, this market is in a
rally that will carry it back to the highs. But, we will continue to watch
for signs that it has changed its mind.."
Well, folks, the signs are here. Today could be one of the most important
postings I have ever made in SignalWatch. I am going to take the
technicals
step by step and show you why I see what I am seeing, to assist you in
assessing your own positions. This is serious.
For starters, look at the 60 Minute Chart on the Dow. You can see that we
are clearly forming a triangle consolidation, after the initial drop from
the highs at 11,750. Now, move to the Daily Chart. If this consolidation
matures, and the index drops through, I would expect it to drop a much 750
points, to something like 10,250. This is based on measuring from the
center of the triangle to the recent high (750 points from 11,000 to
11,750).
Now, look at the Weekly Chart. Can you see that we pulled up to rest just
underneath a significant trendline, going back into the Fall of '99? This
is not a good sign. If the index reverses down off this line, that also
would be a bearish sign.
O.K. So where are we? And, what about the rally potential? We have had a
very nice rally since Monday, gaining 10% on the NASDAQ and a good deal on
the other indexes as well. We've enjoyed some nice moves. I was hoping we
would push through 11,100 Friday. We didn't. So, now we have to look at
all
the technical reasons why this thing could tank. Based on what I'm seeing
at this point, it could do that Monday or Tuesday.
However, if we do push through the upper boundary of this triangle on the
DOW, and pass 11,100, I will continue to hold a bullish posture. We had a
nice rally at the start of last week, and it could hold. I sincerely
believe these key levels; 10,900 and 11,100 will create the roadmap we
need
for next week.
So, trading on Monday should be fairly straightforward, though you may
have
to react quickly. One caution: We could have an up Open. Don't be fooled
by
that. Let it settle down about 30 minutes (at least) and see if we pull
back. My best guess is, we will see a modest down Open (like down 50 on
the Dow). If that happens, I'd exit Longs and look to get Short, depending
on the breadth of the weakness. You can always get back in if we recover
quickly.
As I mentioned above, we are watching 10,900 as a key Warning point.
Obviously, as the index passes the low at 10,750 the decline will be well
in play (if it happens).
Let me again clarify my position, particularly for new folks coming to
SignalWatch. I am NOT saying the market is going down Monday. What I AM
saying is, we have several technical factors that IMPLY a down move will
occur. All we have to do now is confirm it, and be ready to act. I
sincerely hope my commentary helps you in your daily battle with the
markets. If I can achieve that goal, I'm happy..
Thanks for listening, and Good Luck in Your Trading!
Ed Downs
---------------
LINKS TO CHARTS:
60 minute Chart
signalwatch.com
Daily Chart
signalwatch.com
Weekly Chart
signalwatch.com |
