| Updated 10/22 for Thursday's market. |  | ||||||||||||||||
Sharp DeclineDow breaks 9,740, trades sharply lower.From prior commentary, "...The index clearly stayed within the range boundaries and may make another pass down within the range tomorrow. A break below 9,740 will likely spark such a move tomorrow..." The Dow reversed down off the upper boundary of the sloping range today and broke below 9,740, which sparked a significant decline to the Close, as seen in the 15 and 60 Minute Charts. The Dow closed the day at the session lows, losing 149 points for the session. Looking at the Daily Chart shows that the Dow has indeed begun a reversal off the major upper trend line, which is something we were watching for. Clearly, the downmove could last until the lower boundary of the channel is reached at around the 9,400 area. Since the index took a sharp drop today, we expect the Dow to consolidate at the lows for perhaps a session or two before another primary move is seen. A consolidation at the lows will indicate further weakness in the near term. The index has formed a trend line across the highs of today's downmove, which we will watch tomorrow. An upside break of the line at 9,620 could spark a moderate reversal (reaction rally) tomorrow. If we see a break through 9,650 - that would indicate greater strength and true 'recovery' potential. Our expectation is to see a range form, and then a continued move lower. Short Term Dow Short term, the Dow has formed a tight consolidation at the lows of the 5 Minute Chart from 9,580 to 9,620. Watch this range for a break to indicate direction at the Open. Medium Term Dow In the medium term, we entered the market Short this morning at 9,641and are still in the position. We will keep stops at the entry for tomorrow's market and will stay Short below 9,575. We will look to enter Longs above 9,675, with 10 point stops. NASDAQ & S&P The NASDAQ took a sizeable gap to the downside at the Open, while the S&P sold off sharply alongside the rest. Watch the tight consolidations that have formed at the lows for direction tomorrow. * Summary The Dow declined sharply today and ended the day at the session lows. The index is consolidating at the lows, but look for the index to expand the consolidation tomorrow, as the index looks to determine direction. Thanks for listening, and Good luck in your trading.. Ed Downs with assistance from.. |
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