Dow-Thread

Resistance Holds

Dow shows strength early, but closes on intraday lows.

The Dow opened lower this morning, but quickly rallied to test previously established resistance near 10,260. Again, the Dow failed to decisively penetrate above 10,260 and eventually capitulated to close on intraday lows.

The Dow continues to trade within the frame work of the current bearish set up. As noted previously, The Dow continues to trade beneath the "neckline" of the bearish head and shoulder pattern seen in the daily chart. Likewise, the Dow continues to trade within the expanding trading range seen in the 60 minute chart. Within this context, the overall bias remains intensely bearish. However, we may witness a period of consolidation in the near term

Examination of the 15 and 60 minute charts show that a upward sloping trendline has formed beneath the major intraday lows achieved over the last five trading sessions. Should this trendline remain intact, we could see the Dow rally back toward the upper boundaries of the expanding trading range near 10,300. Conversely, a strong break beneath the upward sloping trendline could trigger a profound capitulation toward support at 10,000 and possibly lower.

Short Term Dow

Short term, the Dow has formed a downward sloping trendline across the intraday as seen in the 5 minute chart. Provide this trendline remains intact, we could see further weakness. Focus on short positions beneath 10,200.

Medium Term Dow

In the medium term, we remain without a position in the market. Continue to watch 10,300 up and 10,150 down; use a 20 point stop.

NASDAQ & S&P

The NASDAQ and S&P each showed a degree of strength early in today's session. However, both capitulate toward the end of the trading day to close on lows. Expect further weakness in the near term.

Summary

While the overall bias remains bearish, the key to tomorrow’s action may depend how the Dow trades in relation to upward sloping trendline seen in the 15 and 60 minute chart. Should the Dow hold the 10,150 level, we could see a sharp rally back toward 10,300. Conversely, a downward violation of 10,150 could trigger a profound capitulation toward 10,000.

Thanks for listening, and Good luck in your trading!

Ed Downs
edowns@nirvsys.com

with assistance from..
C.E. Andrews, Market Analyst
candrews@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