Teach Talk Trade Day Trading & Technical Analysis

DOW Directions 03-12-08 (Wednesday): A Daily Technical Analytical View of Stocks, Futures, Eminis and Forex for online and day traders.

DIA (Dow ETF): DOW logs best day in five year!

Tuesday’s market pushed to the fourth all-time highest gain and the highest point gain in five years. The amazing +416.66 gain recovered most of the -500 loss the DOW experienced during the previous three days.   Yesterday, we stated that the DOW deserved a “dead cat bounce”…due to its oversold situation.  The DOW didn’t bounce, it leaped into the sky like Superman.

The daily StoRSI, our momentum oscillator,  powered up from its oversold position on Monday.  After a week of wallowing below its lower trigger level, the StoRSI moved more than halfway up toward the upper trigger level.  Yesterday we blogged: “This market is set up to make a “dead cat bounce”.”   It bounced like a superball!   Any strength on Tuesday will send the indicators and the underlying price to resistance areas.  Three scenarios are possible:  a. the least likely is that Tuesday’s action is the beginning of a new major trend to the upside  b. the market rallies on Wednesday and the StoRSI moves over its trigger level, price moves to the downtrending T8 and we resume the downtrend that we are currently in c.  the market moves to the resistance area on Tuesday and turns down without fullfilling its upside momentum potential (the most logical scenario).

The T8 (maroon line), our moving average that defines trend, continues its downward direction. Even with all the upside movement of Tuesday, this continues to be a negative sign. Yesterday we stated: ”…as price drifts away from the T8 and creates a large distance between the two (price and the T8), the tendency is for price to revert to the mean (T8). We haven’t seen this type of distance between price and the T8 since the low of January 22nd.”  Yesterday, we basically imitated the action we saw during the third week in January.

Tuesday’s candlestick was a big white candle. This is always a good sign, but of no significance in this case. Candles draw patterns of supply and demand. These supply and demand patterns have a high degree of predictability. 

***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.

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Engergy issues ) & The Mechanical Monkey where we discuss our mechanical trades.

 

 DIA: Play Now | Play in Popup | Download (518)