Volatile Session
Dow breaks consolidation to downside, trades in volatile fashion throughout session.
From prior commentary, "...An upside break typically occurs when a consolidation has formed at the highs... However, a downside break from the consolidation will be just as 'potent' as an upside break. In fact, the consolidation is forming a rectangular pattern, which is one of the most powerful patterns to trade on breaks - in either direction..." The Dow got the downside break from the tight consolidation this morning and moved solidly lower thereafter, as seen in the 15 Minute Chart. However, the downside move was short-lived, as the index turned up off the lows to race back within the consolidation boundaries, before finally ending the day lower, ending a volatility-filled session.
The index has now formed a range from 9,170 to 9,305, seen in the 15 Minute Chart, which we will watch closely tomorrow. A downside break from the range will cause a likely retest of the long term lower trend line that has continued to develop since March, seen in the Daily Chart. A downside break of the line at 9,125 will lead to immense weakness.
However, the index has continued to hold strong above the trend line, which implies that we will see continued upside movement above the lower line. An upside break through 9,305 will indicate further strength.
Short Term Dow
The Dow has formed a tight range from 9,195 to 9,223, seen in the 5 Minute Chart. Watch for a break from this range for direction tomorrow morning.
Medium Term Dow
In the medium term, we entered the market Short this morning at 9,225, but covered the position at the entry, thanks to the Breakeven Rule. No other trades were triggered and we are out of the market. Watch 9,190 down, and 9,305 up tomorrow, with 10 point stops.
NASDAQ & S&P
The NASDAQ and S&P each got their respective downside breaks today. However, steady downside moves did not result. The NASDAQ continues to hold below resistance, while the S&P continues to trade within its wide range. Watch the range boundaries tomorrow. *
Summary
The Dow got the downside break from the consolidation today, but did not follow-through to the downside. Rather, the index moved both higher and lower, effectively ending a volatile session near the afternoon lows. We are out of the market and will watch 9,190 down, and 9,305 up 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
** 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
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Rules and Definitions
