From Signal Watch:
Downward Channel
Watching 10,975 as a potential new Long entry point.
From yesterday's commentary, "In the short term, watch the downward sloping trendline across highs in the 5 or 15 Minute Chart (not shown) intersecting at about 10,965. If this line is broken at the Open, we will likely continue back to 11,000 before the next decision point. If, on the other hand, we drop right away, I'd go Short and set your mental stop at 10,955."
It was a "day trading" kind of day today. You can see in the 15 Minute Chart that we did indeed bounce off 10,965 to headed on up to 11,000. I'll have to admit though, it was a wild and wooley ride as we moved back and forth in the trading range! The formation of a new intraday range from 10,950 to 11,000 led to our downside Alert post on the Dow dropping through the low at 10,950 for the afternoon drop. We then got a nice trendline break and V-bottom and caught the rally to just before the Close.
The nice thing about all this for the medium term folk is that we have now formed a very nice channel, sloping downward as marked on the 15 Minute. How do these usually behave? They are broken at the upper line. So, we will be watching 10,975 tomorrow. We did exit our prior Longs at 10,940, and so are looking to go Long again if the upper line is crossed.
Short Term Dow
In the very short term, I would watch for any upward movement through 10,950 and go Long with it, setting your mental stop at 10,940. If we start down, short at 10,940 (again). This is a trading range market, so you can expect lots of up/down behavior. As an intraday trader, you can catch the moves, as we did today, but you want to go with the major trend changes - not the little blips up and down.
For example, after the Open we were all over the map. That was a good time to stand aside. Later in the day, however, we clearly broke 10,960 and the whole market was weak - that was "the" signal of the day for short selling. We subsequently broke a long trendline at the low, a new signal to go Long for a few hours. You need to watch for these trend changes tomorrow, or stay tuned to our Intraday Alerts page, as we will be doing the same thing there.
Medium Term Dow
In the medium term, we are out and awaiting a new break of the upper line in the 15 Minute chart at 10,975. I think we have a pretty good shot at this tomorrow. But be patient. We are forming a wide channel and we COULD trade all the way down to 10,900 before getting the next boost (see chart). If you go Long at 10,975 set your mental stop at about 10,960 if you are able to watch the market. Otherwise, hold all the way down to 10,900. I don't think we will go through that support level tomrrow.
NASDAQ and OEX
The NASDAQ clearly broke down today, gapping at the Open, rallying and then turning back down through 2,600. We are out now, holding on the sidelines to see if 2,600 will be broken tomorrow. On the plus side, we have a very nice upper channel line on this index as well at 2,650 and will be watching it for a break. The OEX doesn't look good at all. It broke our belwether level at 704, dropped through 700 and returned to the resistance line. We will continue to use 704 as the fulcrum level - tending to be Long above, and Short below. It's an important line. **
In Summary:
The market has crossed to the fear side, and is contemplating whether it wants to resume the rallies that started a few weeks ago. It seems to me that these retracements and ranges are normal, a healthy and required activity prior to a major advance. We are now "out" on all three indexes in the medium term, looking for upper trendline breaks. As long as we stay in the broad channels we will have up/down days like today. For the Dow, that channel is 10,850 to 11,050 - a 300 point range. |
