Updated Thursday, 9/4 for Friday's market.
Key DOW Levels for 9/5
UP None
DN None
11,550 Holds..
Dow drops sharply from 11,500, closes lower by 345 points..
From prior commentary, "...The Dow continues to hold beneath the 11,550 fulcrum, which has been a clear "line in the sand" for two weeks...Watch 11,400 for additional selling pressure, and 11,550 for near-term strength..."
The Dow opened the day with a sharp reversal away from the 11,550 level this morning and never looked back, as the index dropped steadily throughout the session in a 345 point losing effort. The index has now gotten a major downside break from the channel and could be headed to the July lows.
The Daily Chart shows the Dow has finally gotten a big downside break through the bottom of the major channel at 11,400. This break also sparked a breakout from the three-week trading range, which further aided the decline. In all, these two major patterns sparked heavy selling pressure, which could snowball into more weakness ahead. Look for a potential test of the July lows at around 10,825 soon.
The Dow has now sold off steadily throughout the week since topping out Tuesday at 11,790. This drop of 615 points is a whole lot in just three trading days, which could mean a modest reversal may be seen. Watch 11,270 for early signs of a bounce from current lows tomorrow. Regardless of a bounce, however, further overall weakness is likely to occur beneath 11,400.
Short Term Dow
The Dow closed the day beneath the intraday resistance level of 11,270, seen in the 5 Minute Chart. Watch this level closely tomorrow morning.
Medium Term Dow
In the medium term, we entered the market Short at 11,391 this morning and are still in the trade with a current profit of 206 points. We will hold stops at 11,300 tomorrow and will hold off on additional positions at this time.
NASDAQ & S&P
The NASDAQ and S&P each broke major levels to the downside en route to heavy selling. Look for more such selling behavior, but be mindful of a potential "dead cat" bounce.
Summary
The Dow closed the day at the lows of the session after dropping throughout the day. The index has gotten a major downside break through the bottom of the large channel, which forecasts much more selling ahead. However, a modest bounce could be seen in the near term.
Thanks for listening, and Good luck in your trading!
Ed Downs
edowns@nirvsys.com
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