Teach Talk Trade Day Trading & Technical Analysis

DOW Directions 02-21-08 (Thursday): A Daily Technical Analytical View of Stocks, Futures, Eminis and Forex for online and day traders.

DIA (Dow ETF): Market continues to waffle and tries to discern direction.

Tuesday’s market saw the DJIA close up +90.04 points. 

The daily StoRSI, our momentum oscillator, has turned slightly up and is looking for direction. Typically, the StoRSI draws large sine curves that trace from top to bottom of its range.  A funny thing happened on its way to the top:  it turned down, then turned back up.  This choppiness is also reflected in the underlying price action.  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.

The T8, our moving average that defines trend, has turned flat during the last two weeks. It does have a slightly positive direction.  But, without a strong angle pointing up or down… identifying a trend a very tricky proposition. During the last week and a half the trend has gone from down to up to down and up once again. This choppiness in  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.

Tuesday’s candlestick  was a “piercing line”.  This is a bullish candle.  A piercing line is created by a gap down opening that closes into the body of the previous day’s candle.

***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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