Teach Talk Trade Day Trading & Technical Analysis

DOW Directions 01-04-08 (Friday): A Daily Technical Analytical View of Stocks, Furtures, Eminis and Forex for online and day traders.

DIA (Dow ETF): Uneventful day could lead to market turn around.

The DOW was up  +12.76 points on Thursday. The NASDAQ was down slightly and the S&P closed unchanged.  After a strong down day on Wednesday, the markets posted supply and demand pictures that imply a turn or at least a pause while it ponders the situation. 

The StoRSI, our momentum oscillator,  closed under it’s trigger level at +7.38.  This low reading signals an end to the downside momentum.  Price could rally from this area, due to the oversold condition of the market (which has caused momentum to indicate the extreme oversold conditions).  

The T8 which was flat for the majority of last week is now accelerating to the downside. There is plenty of room between price and the downtrending T8.  The market could easily rally back to the T8 before it encounters further resistance.  The T8 is our preferred exponential moving average and it dictates our thoughts on the direction of the trend. 

The candlestick formation posted  on Thursday was a “harami”.  The body of Thurday’s candle was inside the body of Wednesday’s candle.  Many times, this formation leads to a reversal in trend.  Confirmation must take place on Friday, but the extension of the wicks to the downside gives us another hint that the market could begin to move up.   

***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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