Mid-Day Decline
Dow sells off from early highs, drops back to key 11,100 level.
From prior commentary, "...If the index cannot rise above 11,150, we could see a break below 11,000 lead to another test of support at 10,700..." The Dow opened the day in bullish fashion and pushed above the 11,150 zone. However, momentum gave out at around 11,185, which eventually led to a big afternoon sell-off back to the 11,100 zone, as seen in the 15 and 60 Minute Charts. The index closed the day with a 2 point loss, but could be gearing up for a much steeper decline.
The Daily and 60 Minute Charts show the Dow is having trouble breaking above the 11,200 level, which is the point at which a clear upper trend line crosses the index. Further, the Dow has put in three consecutive days of late-day reversals after extending above 11,100. If the index cannot break and hold above 11,200 soon, look for a stellar sell-off to occur, likely back toward the 10,700 zone. A break through 11,050 will help to confirm such a move.
However, if the index can break through 11,200, big strength could be seen back toward the May highs.
Short Term Dow
The Dow closed the day within the boundaries of a tight range from 11,085 to 11,130, seen in the 5 Minute Chart. Watch this range for early direction tomorrow morning.
Medium Term Dow
In the medium term, we are still Long the Dow from 10,955 and currently have 145 points in the trade. We will move our stops up to 11,050 for tomorrow's market and will want to stay Long above 11,200. We will hold off on Shorts, unless 11,050 is crossed to the downside; using 20 point stops.
NASDAQ & S&P
The NASDAQ and S&P each sold off from early highs today and continue to be rejected by resistance. Today's decline could be the beginning of much more selling ahead.
Summary
The Dow closed the day with a small loss today and is showing a reluctance to break through the top of the large range at 11,200. Watch 11,050 for early signs of weakness tomorrow, unless 11,200 is solidly crossed.
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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