Break at 10,800
Dow breaks key lower trend line at 10,800, trends lower to the Close.
From prior commentary, "...the lower trend line has continued to develop throughout the recent three-week advance...Look for the Dow to retest the line at around 10,815 tomorrow. A break through this level, confirmed by a break through 10,800, will likely indicate the beginning of a steep retracement..." The Dow opened the session fairly weak this morning, but really sold off upon a break of the major lower trend line at 10,815, as seen in the 15 and 60 Minute Charts. Once this line was clearly and solidly broken, the Dow basically trended steadily lower the remainder of the session, eventually losing 81 points for the day.
The 60 Minute Chart shows the clear break of the lower trend line at 10,800. This break may lead to a sizeable retracement from the recent highs, possibly toward the 10,620 to 10,675 range, which is the 50 and 38% Retracement zones of the recent uptrend.
The fact that the Dow broke support at 10,775 late in the session implies follow-through tomorrow, but we may see a continuation pattern form before another big move occurs. Look for continued weakness below 10,800, unless this level is crossed to the upside. A break here will indicate a reaction rally.
Short Term Dow
Short term, the Dow formed a clear trend line across the highs of the recent decline, seen in the 5 Minute Chart. Look for further weakness below the line tomorrow morning, unless 10,780 is broken to the upside.
Medium Term Dow
In the medium term, we closed out Longs today at 10,830, giving us a 30 point loss. We later entered Shorts in the market at 10,800, but stopped out with a breakeven trade. We re-entered Short at 10,764, but the trade also faltered.
We are out of the market, and will watch 10,800 up, and 10,725 down; using 20 point stops.
NASDAQ & S&P
The NASDAQ and S&P each sold off from recent highs today, as each closed the day at the lows of the session. Look for continued weakness into tomorrow's session, as market gets a much-needed pull-back from the overall advance.
Summary
The Dow closed the day at the session's lows after breaking the key lower trend line early in the session. The index has already begun a 100-point pull-back from the recent highs, but another 100-point decline may be on the horizon. Look for additional weakness below 10,800 tomorrow.
Thanks for listening, and Good luck in your trading!
Ed Downs
edowns@nirvsys.com
with assistance from..
Frank Ochoa, Market Analyst
fochoa@nirvsys.com
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