Updated Wednesday, 6/13 for Thursday's Market
Key DOW Levels for 6/14
UP Through 10,900
DN Through 10,800
62% Retracement
Retracement on the Dow pulls us back to 62% of the 10,800
to 11,000 range. Watching for upside reversal.
>From yesterday's commentary, "I am very serious about using
11,000 as a fulcrum here. We have traded more than I
would like to in the medium term, but we are at a critical
level (11,000) and the market should decide on direction
soon... In the very short term, we are moving up and
watching 10,950 for resolution below the 11,000 level. If
we go through 10,950 at the Open, I'd go with it and hold
stops at the same level."
Very nice. We rallied through 10,950 and continued on up
to 11,000 - our "critical mass" point. We poked a few
points through and then wham - right back down. Amazing,
isn't it? As I've been saying, this is a critical level,
and now we have backed off from it.
The retracement took us 62.5% of the way back to 10,800
(which would be, precisely, 10,875). The market closed at
10,870. So, what would we expect? Logically, since the
market made a straight-line decline from 11,000 we would
expect to see a reversal at the Open, and a move back
towards 11,000. If we break 10,850 though, that will have
an entirely different meaning.
I am suggesting watching 10,850 to the downside for
indication of a true decline, 10,800 to confirm it, and
10,900 to the upside if the market reverses off this key
retracement level.
Short Term Dow
In the very short term, you want to watch 10,875 down and
10,900 up. Either way, we should trend and cover some
ground from there. Hold stops in the middle, about
10,885.
Medium Term Dow
Yep. Still Short. And, of course we're glad to be there.
The decline back off 11,000 was fast and furious, and could
be an indication of more weakness to come. There is really
no way to tell. You have to play the range from 10,800 to
11,000 and trade the break when it comes. We are short,
and I think the odds of a continued move down are fairly
good.
NASDAQ Composite and OEX (S&P 100)
We were watching the highs around 2,175 today as a fulcrum
on the NASDAQ. The index hovered around this zone for a
while, and then fell like a rock in the afternoon - losing
60 points to the final resting place. And, we are now just
above our old 2,100 support level. What does this mean?
Watch out Thursday. I am expecting a reversal and rally
back into the channel, but am equally ready to push the
Sell Button if we drop hard through 2,100. The Daily Chart
gives us a great deal of evidence that we will see a
decline here. And, the OEX has a similar pattern at
support of 640. **
In Summary:
I indicated yesterday that 'My personal "instinct" says we
are going to repel off the 11,000 level.' Sometimes, they
work out, and today was one of those days. It just
reinforces how important that particular number is on this
chart. Now, we are right back above critical support at
10,800. Break or bounce? I would expect a bounce, simply
because we got to 62.5% retracement almost exactly. But, a
break will be just as tradeable. If we drop hard through
10,800 - batten down the hatches.
Thanks for listening, and good luck in your trading!
Ed Downs
edowns@nirvsys.com
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Definitions:
Short Term 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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