Updated 8/6 for Wednesday's market.
Key DOW Levels for 8/7
UP Current Trend
DN Below 8,200
Break and Rally
Dow breaks trend line to upside, rallies 200-plus points. Watch for signs of a continuation.
From yesterday's commentary, "...looking at the 15 Minute Chart, you see that the Dow has now formed a clear upper trend line across the highs of the current three-day downmove. Since the upper trend line is quite well-formed, there is a great possibility for an upside break tomorrow at 8,100. An upside break of the trend line will likely lead to a nice move higher...."
The Dow got the explosive upside break of the upper trend line at 8,100 right at today's Open and even rallied as high as 8,400 before pulling back some just before the Close. The Dow still managed to end the day higher by 230 points, but it's somewhat difficult to tell what tomorrow's likely direction will be.
The fact that the index was able to rally a great deal after the upside break makes the index moderately bullish, especially if it can hold above the upper trend line. However, as we've seen lately, many of the recent rallies have made for better selling opportunities.
Tomorrow we want to see signs that the index can hold on to today's gains. That is, we want to see the index form a higher low above the upper trend line, preferrably above 8,200. If this occurs, we will likely see the index trade higher. Further, looking at the Daily Chart shows that the index could be forming a higher low above 8,000, which would further imply a move higher.
On the flip side, the 60 Minute Chart shows the beginnings of a lower high formation. Lower highs typically imply a move lower, therefore, we will definitely keep a careful eye on this pattern. Essentially, the 8,200 level is theone to watch on Wednesday.
Short Term Dow
Short term, the Dow has retraced to nearly 50% Retracement from yesterday's low to today's high, seen in the 5 Minute Chart. The 50% retracement value is 8,225, therefore, we will watch this level for a downside break, and 8,325 to the upside for Short term direction at the Open.
Medium Term Dow
In the medium term, we covered our Short position at the Open at 8,185 to cap off a nice 330 point gain in our latest position. We then entered Long at 8,255 and are still Long there. We will hold our stop at the entry for tomorrow's trading. We will go Short below 8,200, and Long above 8,325, with 25 point stops.
NASDAQ & OEX (SP 100)
The NASDAQ and OEX each got strong upside breaks today and rallied for much of the day. For tomorrow, we want to see if the indexes can hold on to today's big gains in the form of a higher low or a consolidation at the highs. *
Summary
The Dow got the big upside break of the upper trend line this morning, which sent the index soaring to begin the day. We covered our Short position this morning for a nice 330 point gain and are now Long from 8,255, with stops at the entry. Since the index then sold off late in the day, we are in a watch and see mode at 8,200. We see a possible higher low formation above 8,200. Watch 8,200 down, and 8,325 up tomorrow.
Thanks for listening, and Good luck in your trading..
Ed Downs
edowns@nirvsys.com
signalwatch.com |
