Dow Jones: Channel Break !

Channel Break

Dow breaks lower channel boundary, sells off to Close.

The Dow broke the lower boundary of the channel early in the session, but was not able to follow through to the downside. The Dow traded quietly sideways the remainder of the session before finally getting another sharp sell-off, this time smashing through the lower channel boundary to force a 132 point loss for the day, seen in the 15 and 60 Minute Charts.

The downside break of the steep channel implies a likely retracement, one that is overdue at this point. However, the index will likely form a continuation pattern at the lows before direction either way is seen. Look for the index to consolidate at the lows Monday. Such a consolidation will give us clues to future direction.

A downside break below 10,450 will indicate a continuation lower, while a solid break back above 10,500 will spark strength.

Short Term Dow

Short term, the Dow has formed an expanding triangle at the lows of the 1 Minute Chart, which implies weakness for Monday's Open. Watch 10,480 for strength, and 10,450 for short term direction.

Medium Term Dow

In the medium term, we entered the market Short this afternoon at 10,497 and are still in the market. We will continue to hold stops at the entry to allow wiggle room for the index. We will stay Short below 10,450, and will look for Longs above 10,525, with 20 point stops.

NASDAQ & S&P

The NASDAQ got a round trip session today, while the S&P traded lower and higher before finally settling for a sharp decline. The lower boundary of the channels are beginning to give way, which implies the retracement will likely be extended Monday. *

Summary

The Dow sold off heavily this morning, but didn't really get going until late in the session, in which the index smashed through the lower channel boundary. The downside break from the channel implies further downside movement, but look for the index to remain within the overall long term uptrend.

Thanks for listening, and Good luck in your trading..

Ed Downs
edowns@nirvsys.com

with assistance from..
Frank Ochoa, 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