Break out

DOW:  finally a break??

Yesterday's rally may have broken the wedge to the upside.

Now it needs follow through, a failure here would probably mean trading back into the wedge and testing the lows again.  Volatility still persists.

Gut feel:  still didn't seem to be enough pessimism for a bottom - we'll see.
Rallies like yesterday's can be self fulfilling as short covering increases.
The market was DUE a bounce - so expected.

At moment many markets are near resistance.
Good area to try a short - with a tight stop. for a short term trade

If it does follow through on volume, but the dips.
Initial targets:  25300, 25800  - on the upside.

More volatility - roller-coaster ride in US yesterday

As per yesterday's post (Note 3 on the DOW) markets were trading with more volatility, DOW has an intraday swing of 900 points - up strongly in the morning collapse in the afternoon and finally recovery at the close.

Was that the wash out for the move down? 

Is it rally time?

Evidence for end of down move:
1.  wedge broke to the downside and quickly recovered
2 Possible positive divergence RSI and price (still not confirmed)

However:
1 the recovery to me seemed to be short covering and dip buying
2  on shorter time frames the price has hot a new low and so has the RSI
3. Price is STILL contained in the wedge

So I think more volatility and another test of the wedge boundary (lower)

Needs a break above the top boundary to signal that the down move may be over

NO breaks yet DOW - but close

Looking at the DOW;

2 hour chart

DOW 2 hours

1.  Still contained within falling wedge.  Low boundary 24k  Top boundary around 25k, then 25400 (key)
2.  watch for false breaks either way
3 as the wedge progresses trade will be more volatile - battle between sellers and buyers intensifies

Other markets are similar
DAX daily

1. Daily chart show large head and shoulders  (click link to read about this pattern)(bearish) pattern neckline around 11720, target 10200

2 The neckline was broken, and now it looks like a break above 10370 will be a rally to test that level 11721

3. A break of a head and shoulders neck line is usually retested

DAX 2 hours

1.  Looks like 10370 being tested ..next key level 10430

Markets can see a decent  rally and still not break the longer term bear trend..

warning signs that down trend has, breaking key levels on the upside  finished 

DOW key level 24,000

Watching the DOW - again the markets selling off; The talking heads on CNBC - always bullish - are like deer in the headlights, they do not know what to say or do.

They are still looking for a rally - I think we are getting close but still a final shake out in the cards.  And a key level is 24k.  On the monthly we can see that the steep up trend's lower boundary is at this level (give or take a few hundred points).

DOW MONTHLY

1 . A significant break below 24 k would indicate a large correction is under way

2. a test and hold of this level will more than likely see new highs

Why do I think we may be close to a rally?  Look at the daily chart.

1. There seems to be a positive divergence forming
2. It looks like a falling wedge  Which has bullish implications (click on link for explanation from stockcharts.com)
3.  Falling wedges tend to have a false break out in the direction of the wedge, which if it happens will be the final wash out before a rally

Thursday short covering - quick post

Well everyone was bullish today - the DOW up 500 points at one stage... has the short term down trend changed?


Not according to my charts

DOW 2 HOURS

What can be seen in the chart

1. Despite the rally today the DOWN TREND is still intact
2.  I think a break above 25300 would be a signal that the down trend has finished
3.  A break of 24520  the very short ascending channel/wedge from the lows, will see new lows target 24k minimum

4.  It feels like the move is coming to an end - see previous post for the possible postive divergence set up

Long time - a look at the DOW

It's been a while , the main reason being that the market has been in a low volatility long term rally but in the last 2 weeks all has changed.

Up to 2 weeks ago the majority were all expecting new highs for the US markets, me included, however since then bullish investors have had a wake up call; the buy and hold scenario may be changing - MAYBE.  Volatility is great if you are nimble.

What do the charts show - remembering that a chart fo a stock, market, commodity and any other trade able instrument shows the underlying behaviour of market participants at any one time.
They don't predict the future nut they CAN tell you how these investors behaved at previous price levels in the past, which can help to formulate a plan for the future direction - remembering that in markets there can always be more than one option so an open mind is essential - don't get welded to your view ! 

DOW:  headline index - makes all the news!
Looking at the LONG term...steeping back

DOW MONTHLY

What does it show:

1.  the market has been in an uptrend since 2008 (financial crisis) - 10 years
2. After a minor correction in late 2015 early 2016 the rally resumed at a steeper angle, buyers more aggressive
3 The recent fall is testing the accelerated up-trend line  KEY level.  Hold here and a rally to new highs is likely.
4.  A BREAK below here could see downside to the long term trend line.

Remember this is a long term chart ..good to look at different time frames to get ideas about long term perspectives.

DOW WEEKLY

This shows a closer look at the longer term. It clearly shows that 24000 is the key level.  However in my experience it will likely overshoot a little..the key here will be if it rebounds quickly...

DOW DAILY

POINTS

1. Possible positive divergence on daily chart between price and RSI - not confirmed yet

2. Seems to coincide with the steeper uptrend

So at the moment I would say that the market is close to finding support at around 24000, with a possible overshoot to below but a quick recovery.

Then a re-test of the low before the rally resumes could tie in with after elections in USA.

CAVEAT:  this is just one scenario but IMHO it's all about probabilities and behaviour.  A word of warning - if you use CNBC take it with a pinch of salt - entertainment.

Next post : looking at smaller time frames