Dow-Thread

Head and Shoulders Top

Dow forms bearish pattern, gets extreme late-day volatility.

The Dow held at the highs the entire session today, forming a large consolidation throughout the day, as seen in the 15 Minute Charts. The consolidation actually formed in the shape of a head-and-shoulders top, which eventually broke to the downside, sparking a vicious decline early in the afternoon. However, the index formed a v-bottom reversal and rallied back up to the 'neckline' before finally closing the session lower by 61 points.

Today's volatility is typical of what happens after a sharp decline of the magnitude of last week's downmove, seen in the 60 Minute Chart. This timeframe shows the Dow may be forming a wide, expanding range at the lows, which indicates more volatility and an eventual decline.

As long as the index holds below the critical support level of 10,360, seen in the Daily and 60 Minute Charts, further overall weakness is likely. Look for the index to continue trading sideways within the boundaries of the expanding range, which spans from 10,000 to 10,250. A break from this range will likely indicate another big move.

Short Term Dow

Short term, the Dow ended the day just beneath the broken support level of 10,170, seen in the 5 Minute Chart. Watch for weakness below this level Monday morning.

Medium Term Dow

In the medium term, we closed Longs in the market at 10,180, giving us a 20 point loss. We later entered the market Short at 10,100, but stopped out with a breakeven trade.

We are now out of the market and will watch 10,300 up, and 10,000 down; using 20 point stops.

NASDAQ & S&P

The NASDAQ and S&P each opened the session with a pull-back, with the tech-heavy index taking the brunt of the decline early on. Each index looks to be forming wide trading ranges, which we will watch closely Monday.

Summary

The Dow closed the day lower today after breaking an intraday range to the downside. A late-day reversal showed the kind of volatility we are likely to see within the boundaries of the newly-forming expanding trading range. Watch for continued range movement within the boundaries of this range until a major break occurs.

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

Gap and Hold

Dow shows strength; Bearish patterns remain intact.

The Dow opened today's session with a strong overnight gap and an early buying surge. However, after the initial strength, the Dow promptly found short term resistance near 10,260 and spent much of the session in tight consolidation. Although the Dow did experience some late session volatility, it failed to achieve either a new intraday high or new low.

While the Dow did display a degree of strength today, its overall outlook remains the same. As previously noted, the Dow continues to trade firmly beneath the "neckline" of the bearish head and shoulder pattern seen in the daily chart. Likewise, the Dow continued to trade within the framework of the expanding trading range seen in the 60 minute chart. Both patterns indicate the likelihood of increased volatility in the near term and an eventual decline.

Provided that the Dow remains below the 10,360 support level seen in the daily and 60 minute charts, further weakness can be expected. Look for the indexes to continue to trade within the expanding trading range between 10,000 and 10,260. A decisive break outside this range will trigger the next primary direction

Short Term Dow

Short term, the Dow traded in a tight consolidation range through much of today's session. Look for a break above 10,260 for a long position. Conversely, look for a short position with a break beneath10,200.

Medium Term Dow

In the medium term, we remain without a position in the market. Continue to watch 10,300 up, and 10,000 down; using 20 point stops.

NASDAQ & S&P

The NASDAQ and S&P each opened the session with a degree of strength. However, both quickly found near term resistances and spent much of the session in consolidation.

Summary

The Dow showed early strength today before finding short term resistance. Although the Dow closed the session higher, it continues to remain within the framework of the expanding trading range. Watch for continued range movement within the boundaries of this range until a major break occurs.

Thanks for listening, and Good luck in your trading!

Ed Downs
edowns@nirvsys.com

with assistance from..
C.E. Andrews, Market Analyst
candrews@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