Updated Tuesday, 8/26 for Wednesday's market. Key DOW Levels for 8/27 UP Above 11,450 DN Below 11,335
H&S Building Out.. Dow builds out at lows, builds out bearish H&S pattern.
From prior commentary, "...look for more range movement between 11,300 and 11,650 before major direction is decided..." The Dow traded mostly sideways throughout the session today, as the index built out a clear consolidation range from 11,340 to 11,440, seen in the 15 Minute Chart. The index rallied from the bottom of this range late in the day, ending the session with a gain of 27 points. However, a highly bearish pattern is now forming, which we will watch closely tomorrow.
The 15 and 60 Minute Charts show the current two-day consolidation actually happens to be the right shoulder of a developing head-and-shoulders pattern, which is a highly bearish pattern. A downside break through the neck line of the pattern at 11,340 could spark the next 300 point move in the index. Watch 11,335 for clear signs of weakness tomorrow morning.
If the right shoulder (consolidation) is broken to the upside at 11,450, however, we could see another test of prior highs at around 11,600. Watch this range closely tomorrow.
Short Term Dow
The Dow closed the day above near-term support at 11,340, seen in the 5 Minute Chart. Watch this level closely for early direction tomorrow morning.
Medium Term Dow
In the medium term, we are still out of the market and will watch 11,335 down and 11,450 up; using 25 point stops.
NASDAQ & S&P
The NASDAQ and S&P each rallied from late-day lows behind the strength of the Dow. The S&P has formed a bearish H&S pattern similar to the Dow, which we will also watch tomorrow.
Summary
The Dow ended the day within the right shoulder of a bearish H&S pattern, which we will focus on tomorrow. A breakout from this pattern could move the market about 300 points.
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
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Rules and Definitions Dow 15 Minute Chart
Dow 60 Minute Chart
Dow Daily Chart
Dow Weekly Chart
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