Teach Talk Trade Day Trading & Technical Analysis

DOW Directions 01-22-08 (Tuesday): A Daily Technical Analytical View of Stocks, Furtures, Eminis and Forex for online and day traders.

DIA (Dow ETF): World markets crash as Fed tries to save the day (week, month, year).

Capitulation definition: Webster’s defines capitulation as a giving up after offering resistance. In the markets: capitulation happens after the market has taken a beating and then, finally, there is a breathtaking directional bottom. 

 Certainly, the DJIA was headed to capitulation on Tuesday.  Major markets, from around the world, were down 4 to 8 percent on Monday.  The US markets were on a holiday Monday, but they were trading down over 500 points in the futures contracts before the Fed came in and cut rates by 3/4 of a point Tuesday morning.  This caused the market to rebound 300 points in early futures trading.  Prepare for Tuesday to be a memorable day on Wall Street.

The StoRSI, our momentum oscillator, has continued to come down for the past week.   Yet, the StoRSI still has room to drop. It has not reach its lower trigger level during this current slide to the downside.  Usually, issues traverse from top to bottom and back again….many times  penetrating the upper and lower trigger levels.  In this case, the StoRSI could put additional pressure on prices as the it slides to its lower trigger.

As stated: any rallies to the T8, our preferred exponential moving average, would be terrific opportunities to sell. Unfortunately, we are now a very long way away from the T8.  What seems like a tall order for this market (the ability to rally back to the downtrending T8) might not be out of reach.  Volatility rules and volatility could gyrate prices back to the downtrending T8.  The T8 indicator dictates our thoughts on the direction of the trend. As the T8 begins to decline at a steeper angle, the T8 is even a more powerful resistance.

Friday’s candle continued to feature black bodies and we see no particular features in the candles. The only distinguishing feature is that we continue to post negative, black candles…day after day. 

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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