Updated Tuesday, 8/19 for Wednesday's market. Key DOW Levels for 8/20 UP None DN Below 11,300
Bearish Continuation.. Dow drops further out of channel, closes at lows.
From prior commentary, "...the Dow is beginning to violate the lower boundary of the range at 11,500 and closed the day at near-term support at 11,450. Watch this support level for bigger signs of a break tomorrow, as a test of 11,400 could be around the bend..." The Dow opened the day with early weakness this morning, as the index dropped further out the bottom of the large channel that we've been watching, seen in the Daily and 60 Minute Charts. The index broke below 11,400 and closed the day near the lows of the session with a loss of 131 points. Look for more weakness below 11,500 ahead.
The Daily and 60 Minute Charts show the Dow has finally gotten a very clean downside break through the bottom of the major channel at 11,500. This break could be the beginning of a heavy decline ahead, especially should the index remain beneath 11,500. Since the Dow has dropped steadily from 11,700 without much of a pull-back, we could see the Dow test 11,500 before another big drop occurs.
Short Term Dow
The Dow closed the day within a clear range that spans from 11,320 to 11,400, seen in the 5 Minute Chart. Watch this level closely for early direction tomorrow morning.
Medium Term Dow
In the medium term, we entered the market Short at 11,400 this morning and are still in the trade with a current profit of 43 points. We will continue to hold stops at 11,400 and will want to stay Short below 11,300. We will hold off on Longs at this time.
NASDAQ & S&P
The NASDAQ and S&P each dropped throughout the morning and closed the day near the session's lows. Look for more overall selling ahead, especially should near-term support levels be crossed.
Summary
The Dow closed the day near the lows of the session after dropping throughout the day. The index has gotten a big move away from the lower boundary of the channel, which means more overall selling pressure could be ahead.
Thanks for listening, and Good luck in your trading!
Ed Downs edowns@nirvsys.com
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