Dow-Thread

Trendline Violation

Dow breaks above 10,250.

The Dow opened the session quietly, with no clear indication of direction. The Dow spent much of the session in a tight bullish consolidation pattern. With one hour remaining in the trading session, the Dow moved strongly higher, breaking above the downward sloping trendline seen in the 15 and 60 minute charts. With this late session move, the index closed with a gain in excess of 100 points.

The fact that the Dow was able to trade above the downward sloping trendline seen in the 15 and 60 minute charts bodes well for a bullish advance in the near term. In addition, the Dow continues to trade above the upward sloping trendline seen in the 60 minute and daily charts. Provided this trendline remain intact, we are likely to see continued strength. Should the Dow continue its current advance, the index is likely to progress toward 10,300 before experiencing resistance. Further strength above 10,300 should instigate another strong advance toward medium term resistance near 10,400, as seen in the 60 minute chart.

However, while the downward sloping trendline was violated today, it was not violated in a decisive manner. In fact, the Dow closed only 3 points above 10,250. Hence, we must consider the possibility of a bearish retracement back toward the upward sloping trendline near 10,125. This trendline has been established since the Dow found support near 10,000 on April 20th. A violation of 10,125 will likely provide the bearish catalyst for a re-test of 10,000.

In the near term, we may see a mild retracement and/or a brief period of consolidation as the index trades between these two diverging trendlines. This is to be expected as the Dow gears up for its next decisive break.

Short Term Dow

Short term, the Dow established a clear intraday uptrend. Look for continued strength above 10,230.

Medium Term Dow

In the medium term, we have entered the market long at 10,250 with a 20 point stop. For Tuesday, We will look to remain long above 10,275. Conversely, we will look for a short position with a break below 10,125; use a 20 point stop.

NASDAQ & S&P

The NASDAQ and S&P both make solid advances today. The NASDAQ remains commented to its established uptrend. Likewise, the S&P held above key medium term support and moved strong upward.

Summary

The Dow showed profound strength today, as it close above the downward sloping trendline seen in the 15 and 60 minute charts. However, while today's advance was encouraging, it was far from decisive. We will look for continued strength above 10,275. Conversely, a break below 10,125 could trigger a bearish decline 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

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