Love from Spain.Updated Friday, 3/16 for Monday's Market
Key DOW Levels for 3/19
UP Above 9,900
DN Current Trend
Down Again
Tight intraday range from Thursday broke to the downside
today. A new trendline has formed in the intraday charts.
From yesterday's commentary, "For Friday, I would trade the
break of 10,000 (down) or 10,040 (up). Then, look for a
reversal at the extreme ends of the range - 10,100 to the
upside and 9,900 at the low end. If we break one of those
levels, go with the break in that direction... if we drop
through 9,980, we could be in real trouble. "
The Dow fell out of the tight consolidation from yesterday
moving down through 10,000 and heading to 9,900 where it
reversed briefly. Then, it broke 9,900 again and headed 75
points lower. Not a bad day for the short side.
The good news for today is we have formed a fairly solid
trend line across highs, which I have marked in the 15
Minute Chart. If we can break this line (at 9,900) at
Monday's Open, we have a good chance of forming a higher
low. However, the overwhelming evidence of the Diamond in
the Weekly Chart suggests that buying on such a break may
only lead to a short term rally of a few hundred points
before a new selloff starts. We have to be careful.
At this point, we are in defensive mode, and Short on the
crossing of 9,900. I had speculated that 10,000 might hold
up today, but since it did not, we have to assume even more
weakness exists and go with it. Until the downtrend is
broken, and a higher low forms in the 60 Minute Chart, we
must assume the market will go lower.
Short Term Dow
For Monday, I would look to Short the low of today's
closing range, at about 9,820. Or, if we move up, buy the
high of the range (in the 1 Minute Chart) at about 9,860.
In each case, we need to keep tight stops, because the
market is so volatile right here. What we are hoping for
on these entries is a continuation of the short term trend
before the next trading range reversal sets up, to lock in
an intraday move.
Medium Term Dow
In the medium term, our entry levels worked well today, and
going Short at 9,900 gave us some cushion going into
Monday. I am going to set our medium term cover point at
the same level (9,900) - if the market is going to tank
Monday it should not go through that level, in my opinion.
On the downside, we will Short more at 9,820.
NASDAQ and OEX
The NASDAQ continued down, as we expected it to, but formed
an interesting double bottom at the 1,880 level. This
could be a sign of a rally for Monday, but again, the
pennant we saw form a few days ago implies a move down to
1,650 so we have to be careful here. The OEX is now below
590 and looks quite weak. I would not go Long there until
600 is crossed with force.
In Summary:
In our Intraday Alert post at the Close, I suggested not
holding Long over the weekend, because of the fact that the
OEX is below support and the NASDAQ has a very negative
pennant formation. Not to mention the Diamond on the Dow.
I will add that this is the kind of market that can
suddenly form a spring-back rally, since it is so oversold.
However, we must follow the technical evidence. If Monday
does rally, we will watch for signs of a true bottom - a
higher low and other indications. However, all the
technical evidence I can see points to lower levels in the
medium term.
Thanks for listening, and good luck in your trading!
Ed Downs
edowns@nirvsys.com
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Definitions:
Short 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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