At Critical Support
Dow reaches critical support, holds to the Close.
From prior commentary, "...The index may be forming an expanding range at the lows of the recent decline, which is likely a holding pattern before the next sell-off. Watch for a reaction rally Monday, as the index trades in volatile fashion within the boundaries of the range before the ultimate break..." The Dow opened the session lower today, as the index sold off precisely to the 10,365 support level, which has remained in tact for five months, seen in the Daily Chart. The index eventually got a reaction rally from the day's low to the tune of about 85 points, ending the session higher by 17 points.
The Dow continues to trade within the boundaries of a potentially bearish expanding trading range, which is developing at the lows of the 60 Minute Chart. This pattern forecasts another steep decline in this index, but further volatility within the pattern may occur before a break either way happens.
An upside push through 10,450 could spark a steep rally toward the top of the range at around 10,600 tomorrow. Watch this level for early strength. Otherwise, a break through 10,360 may spark further overall weakness.
Short Term Dow
Short term, the Dow has formed a tight range at the highs of the 5 Minute Chart from 10,410 to 10,445. Watch for a break from this range for movement at the Open.
Medium Term Dow
In the medium term, we are still Short from 10,475 and will continue to hold stops at 10,450 for tomorrow's market. We will want to stay Short below 10,360, and will want to enter Longs above 10,450; using 20 point stops.
NASDAQ & S&P
The NASDAQ and S&P each pushed higher to the Close today, with each remaining within the boundaries of their respective ranges. Look for further volatility within the range until a clear and solid break occurs.
Summary
The Dow ended the day with a nice move higher from the lower boundary of the expanding range. Look for the index to continue trading within the boundaries of the range. An upside push through 10,450 may lead to a nice rally toward the top of the range in the near term; while a break through critical support at 10,365 will indicate a major decline.
Thanks for listening, and Good luck in your trading!
Ed Downs
edowns@nirvsys.com
with assistance from..
Frank Ochoa, Sr. Market Analyst
fochoa@nirvsys.com
** Note: We are now posting Index entries and exits in Real Time, through our new Intraday Index Alerts service. To learn more about the service, visit SignalWatch.com and select Intraday Alerts from the main navigation bar. - SW Team
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