Teach Talk Trade Day Trading & Technical Analysis

DOW Directions 02-22-08 (Friday): A Daily Technical Analytical View of Stocks, Futures, Eminis and Forex for online and day traders.

DIA (Dow ETF): Dow stumbles and closes down -142.96.

Thursday’s market opened higher and soon begin its negative, downward drift…closing just above the lows for the day.  The market continues to to be volatile, yet it continues to trade in a narrow trading range.

The daily StoRSI, our momentum oscillator, has turned down once again.  Typically, the StoRSI draws large sine curves that trace from top to bottom of its range.  Currently, the market is chopping in a narrow range and the StoRSI reflects the mood of the market.  Seldom does this indicator spend much time in the middle of its range.  When the StoRSI spends time in the middle of its range, the market is in a consolidation phase.    Sideways markets are very tough to trade.

 The T8, our moving average that defines trend, has turned flat during the last two weeks.  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.

Thursday’s candlestick was a “dark cloud”. This is a bearish candle. A dark cloud is created by a gap up opening that closes down 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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