Teach Talk Trade Day Trading & Technical Analysis

DOW Directions 02-12-08 (Tuesday): A Daily Technical Analytical View of Stocks, Futures, Eminis and Forex for online and day traders.

DIA (Dow ETF): Market crawls higher as momentum bottoms and turns up.

Monday’s market saw the DJIA close up +57.88 points. We seem to be entering a period of time that is confusing and contradictory from a technical viewpoint.  Some of our important indicators are telling us different things.  Momentum is indicating upside potential, while the trend has turned down.  Meanwhile the candlesticks offer no clues and continue to post spinning tops.

The daily StoRSI, our momentum oscillator,  turned up, from below its trigger level.  This is construed as a positve sign.  As we have recently stated: “Technical wisdom would dictate a bounce from these low StoRSI levels. Seldom do we stay down for any length of time when the momentum oscillator reaches these low levels. This oversold situation sets up buying opportunities…providing the trend remains positive.”  The biggest problem with the preceding statement is that during the last two trading days, the trend has turned negative. 

Now that the daily moving averages  have turned down, we need to relax and allow the market to decide on its real direction.  If the market begins to fall from this recent turn in trend, we can always sell retracements to the downtrending T8.   

As the market tries to decide on its direction, the last four candles have been spinning tops.  These spinning tops are signs of market indecision.  Many times when the market creates conflicting technical patterns, the market ends up going sideways. 

Please keep and mind and read the following thoughts on volatility. We have been preaching about volatility since August and we don’t believe that things will calm down for many, many months.

***Volatility Alert:

During the third week in July, volatility returned to the major stock indices. For approximately four years, the markets have had low to very low volatility. This significant change has ushered in swings of 100, 200 & 300+ points, sometimes on a day-to-day basis. Stock indices tend to be either volatile, or not, for three to five years at a time. Expect continued volatility. The current volatility cycle has just started its volatile period. We feel this is the early stages of volatility and we continue to believe it is here to stay.

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