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DOW Directions 03-07-08 (Friday): A Daily Technical Analytical View of Stocks, Futures, Eminis and Forex for online and day traders.

DIA (Dow ETF): Can you spell C A P I T U L A T I O N?

Thursday’s market was another train wreck.  After breaking out of its consolidation pattern of the recent months, the DOW tanked -214.60  Technical patterns hint of at least another 150 point drop.  This could happen rather quickly and may not be the lasting bottom.

The daily StoRSI, our momentum oscillator, penetrated its downside target earlier this week.  After moving off the bottom and turning positive, Thursday’s action saw the market force the indicator to a negative posture…once again.  Skidding along the bottom of the range, the StoRSI continues to draw a very negative pattern.  We’d prefer to see is a “V” - bottom when powering out of the lowest momentum levels. Instead, the StoRSI continues to skid along its lowest level. As we have stated this week: “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. 

Thursday’s candlestick was a black candle with no real supply and demand definition.   The “hammer handle”, posted on Tuesday, should support this break of consolidation.  A break below Tuesday’s hammer would set up a test of the lows of January 22nd. 

***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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