Steady Decline
Dow breaks triangle to downside, trends lower to the Close.
From prior commentary, "...Watch the boundaries of the consolidation tomorrow, as a break will likely lead to another sharp move. Watch 10,400 up, and 10,325 down for a violation tomorrow. A break either way should yield clear movement..." The Dow opened the session sharply lower, as the index tested the lower boundary of the triangle right from the beginning, as seen in the 15 Minute Chart. The Dow crossed the lower boundary of the consolidation at 10,325, which eventually led to a steady 103 point decline, also seen in the 60 Minute Chart.
Given today's downside break, we can expect the index to endure a period of pull-back from the recent highs, seen in the Daily and 60 Minute Charts. Look for the index to test 10,200 soon, as this is the next clear level of concern for the index. A break at this level will indicate an even steeper decline, possibly back toward 10,000.
We may see continued volatility as the index struggles to find direction. However, continued weakness is likely beneath 10,350. An upside push through this level will indicate near term strength.
Short Term Dow
Short term, the index has formed a clear range at the lows of the 5 Minute Chart from 10,250 to 10,285. Watch for a break from this range for movement tomorrow morning.
Medium Term Dow
In the medium term, we entered the market Short at 10,324, but stopped out with a breakeven trade. We later re-entered Shorts at 10,294 and are still in the trade. We will hold stops at the entry and will want to stay Short below 10,200. We will hold off on Longs, unless 10,350 is crossed to the upside; using 20 point stops.
NASDAQ & S&P
The NASDAQ and S&P each breached lower boundaries, sparking varying degrees of a retracement. Look for each index to remain slightly weaker, unless key levels are crossed to the upside.
Summary
The Dow ended the day near the session lows after breaking the consolidation to the downside. Look for a continuation lower in the near term, especially if the index holds beneath 10,350.
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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