Teach Talk Trade Day Trading & Technical Analysis

DOW Directions 03-06-08 (Thursday): A Daily Technical Analytical View of Stocks, Futures, Eminis and Forex for online and day traders.

DIA (Dow ETF): Dow’s recent “spinning tops” adds to confusion of market direction.

Wednesday’s market went up and down and closed with a bit of a spurt.  The confusion continues as the market continues to trade in a consolidation pattern.

The daily StoRSI, our momentum oscillator, has finally penetrated its downside target (the lower trigger level). Usually when the momentum sinks below the lower trigger level, the odds start to favor a bounce to the upside.  What we like to see is a “V” - bottom when powering out of the lowest momentum levels.  Instead, the StoRSI continues to skid along its lowest level.  At times, this inability to reverse direction can be troubling and lead to lower prices.

The T8 (maroon line), our moving average that defines trend, is gaining momentum to the downside.  The steeper the angle becomes in the T8, the more trouble the market will have gaining upside momentum.  Price and the T8 have been confined to a tight trading range and until we break out of the trading range (red-dashed line) direction will be difficult to discern.

Wednesday’s candlestick was a spinning top.  Spinning tops are signs of indecison and the market continues to demonstrate confusion at this level.  Tuesday’s hammer should hold price movement to the downside as we continue the sideways action this week.

***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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