Love from Spain.Updated Friday, 4/6 for Monday's Market
Key DOW Levels for 4/9
UP Through 9,800
DN Through 9,700
Retracement forms Pennant
Indexes retrace as expected, but form upside consolidation
patterns. We now have tight ranges to watch Monday for
breaks.
From yesterday's commentary, "Whenever you have a large
move like this, you start looking for the retracement. Any
move down through 9,900 will be suspect, and I would
basically use this level as a fulcrum on Friday. I think
we could see some big swings, and the largest of these
should be down, as the market hesitates..."
Clearly, going Short at the Open through 9,900 was an easy
100 point day, even if you just held to the close. As I
indicated yesterday, 10000 is an important psychological
level. We are not going to go through it easily.
Take a look again at the Daily Chart. You can see the
range from 9,400 to 10,000 - forming a downside
consolidation. This is very, very negative long term. Why?
Because of the Diamond formation in the Weekly Chart. We
are now below the lower line of this pattern, and
consolidating. Not good.
However, I'd like to take your attention to the 15 Minute
Chart, if I may. We have a line at 9,700 and a sloping
trendline at 9,800. The formation of this nearly perfect
triangle pattern implies a move up through 10,000 - IF the
9,800 level can be broken solidly. This is what we will be
looking for Monday. Or, we could go down and push through
the bottom. Such an event would be indicated by a
violation of 9,700.
Short Term Dow
In the very short term, I would expect a break of 9,800
early in the day, simply because the Close is positioned
right underneath it. If we do that, I would expect the
market to rally a hundred points or so. If we start down,
hold off until we break 9,700. We may come back to 9,700
and rally from there. Basically, 9,700 and 9,800 are our
action points for Monday.
Medium Term Dow
Yesterday, I indicated that "the more likely scenario would
be a failure off 10,000. So, we will be holding Long, but
watching that upper resistance line very carefully
tomorrow." Well, we reversed immediately off 9,900 and
pushed back down to our important 9,700 number. Now, the
jury is out until we either cross 9,700 or 9,800. I am
going to suggest equivalent positions in the medium term to
the short term this time, simply because the pattern that
formed today in the 15 Minute Chart is so clear.
NASDAQ and OEX
We got our NASDAQ reversal, OEX too, below the primary
resistance lines at 1,800 and 605 respectively. The
interesting thing about these indexes is they have also
formed upside, wedge patterns, implying upside moves
Monday. We will see - the important thing will be to watch
the lower boundaries for failure, at 1,700 and 572
respectively.
In Summary:
Yesterday, I indicated I was "expecting moderate
retracements on all three indexes over the next two days as
they hit their upper resistance lines at Dow 10,000; NASDAQ
1,800 and OEX 605." We got that. Now, will we turn back
up through the pennant consolidations that have formed?
Likely. I can't say yet whether this is going to be the
start of a true recovery, but it is unlikely, based on the
Diamond on the Dow and the fact that we are still in the
woodshed on earnings. But, the market is not a rational
being. We will watch our upper resistance levels (Dow
10,000; NASDAQ 1,800; and OEX 605), and work our way from
there. For Monday, the lower boundaries are more important
(Dow 9,700; NASDAQ 1,700; OEX 572).
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
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Dow 60 Minute Chart
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Dow Daily Chart
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Dow Weekly Chart
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legend
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