Teach Talk Trade Day Trading & Technical Analysis

DOW Directions 02-19-08 (Tuesday): A Daily Technical Analytical View of Stocks, Futures, Eminis and Forex for online and day traders.

DIA (Dow ETF): Dow pauses during volatile period.

Friday’s market saw the DJIA close down only -28.77 points. This is a relatively small drop compared to the market action of the last six months.

The daily StoRSI, our momentum oscillator, turned flat on Thursday, then down on Friday.  This is a negative sign.  Sometimes markets do not move swiftly from top to bottom and the StoRSI chops in the middle of the move.  This is the current situation.  Many times choppiness in the momentum oscillator leads to volatile, but choppy movement, in the underlying market.  Although the market has traded in a narrow range for the past 3 1/2 weeks, volatility remains the key feature of the current indices.

The T8, moving average, has turned flat during the last two weeks.  This makes identifying a trend a very tricky proposition.  During the last week and a half the trend has gone from down to up to down again. This undefined direction has caused the  the indicators to go flat. Make no mistake about it: even though the market is chopping back and forth, this choppiness is very volatile.

Friday’s candle was a “doji”.  Doji’s are signs of market indecision.  Nothing smacks more of indecision than a market that closes approximately where it opens.  Most of the major indices did that on Friday 

***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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