Consolidating
Dow trades sideways, forms framework of consolidation at lows.
From prior commentary, "...The index will likely continue to trend lower toward the lower boundary of the major channel at around 9,600. However, we could see the index form a continuation pattern before 9,600 is hit. Look for the index to consolidate at the lows before another key drop occurs..." The Dow traded sideways throughout the session today, as the index held at the lows of the recent decline, as seen in the 15 and 60 Minute Charts. As we mentioned Friday, markets tend to hold at the lows after steep declines, therefore, a continuation pattern form was very likely to form - and did.
The fact that the consolidation has formed at the lows of the recent decline implies continued weakness in the medium term. Look for the index to continue trading within the boundaries of the range from 9,790 to 9,900 before another big move occurs.
A downside break from the current range will indicate movement toward the lower boundary of the wide channel, seen in the Daily Chart. Look for continued weakness toward 9,600 in the medium term. Otherwise, an upside break through 9,000 could spark a moderate reaction rally back up within the channel's boundaries. Watch these boundaries tomorrow.
Short Term Dow
Short term, the Dow ended the day right at short term support at 9,820, seen in the 5 Minute Chart. Watch this level closely tomorrow morning, using it as a fulcrum.
Medium Term Dow
In the medium term, we are still Short the Dow from 10,075 and will move our stops down to 9,900 for tomorrow's market. We will stay Short below 9,775 and will look to enter Longs above 9,900; using 20 point stops.
NASDAQ & S&P
The NASDAQ and S&P each traded sideways the entire session, forming tight ranges at the lows. Look for continued sideways movement before a break occurs. *
Summary
The Dow closed the session flat today, as the index lost less than one point for the session. The index is holding at the lows of the recent decline and has formed the framework for a consolidation at the lows. Look for continued sideways movement before another break occurs. Such a break should provide key movement.
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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