Updated Tuesday, 10/14 for Wednesday's market.
Key DOW Levels for 10/15
UP Above 9,800
DN Below 9,000
Pop & Drop..
Dow rallies at Open, but drops from highs for 77 point loss.
From prior commentary, "...In the longer term the battleground is still around the 8,400 level, though in near term we could see bullish moves toward the 10,000..."
The Dow opened the day with another huge burst of strength this morning, as the index rallied strongly out of the gate for an early 405 point gain, as seen in the 15 Minute Chart. However, the Dow topped out at 9,800 and dropped 700 points before closing the day with a modest bounce and a 77 point loss.
While today's movement was relatively muted compared to the last several sessions, the Dow still managed to have a big range of movement for the day and much more movement could be seen ahead.
The 15 and 60 Minute Charts show the Dow is building out a large triangle pattern that has a back end of 2,240 points. This is a gigantic triangle and it is especially fascinating that a triangle of this size has formed over the last six trading sessions. By comparison, the large triangle that we marked in the Weekly Chart has a back end of 3,515 points, but this pattern formed over the course of 2 years.
The developing triangle certainly has the potential to spark another major breakout ahead. Watch 9,800 up, and 9,000 down for the next major breakout move. While an upside break through 9,800 may lead to big strength right out of the gate, be careful on a downside break through 9,000, as such a move may produce key selling, but may also lead to a redefinition of the triangle.
Short Term Dow
The Dow ended the day above 9,000, but could see this level tested soon, as seen in the 5 Minute Chart. Watch this level for early direction tomorrow.
Medium Term Dow
In the medium term, we are still out of the market and will watch 9,800 up, and 9,000 down; using 25 point stops and disregarding the 30 Minute Rule. We will look to take profits after our trades reaches 250 points.
NASDAQ & S&P
The NASDAQ and S&P each pulled back from early gains this morning and are now building out potentially powerful patterns. Watch the development of these patterns ahead.
Summary
The Dow closed the day with a relatively modest 77 point loss today, but is clearly gearing up for a major breakout opportunity ahead. Watch the triangle closely for the next big move.
Thanks for listening, and Good luck in your trading!
Ed Downs
edowns@nirvsys.com
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