Teach Talk Trade Day Trading & Technical Analysis

DOW Directions 03-18-08 (Tuesday): A Daily Technical Analytical View of Stocks, Futures, Eminis and Forex for online and day traders.

DIA (Dow ETF): Wild session turns into positive day

Monday’s market gapped down, to start the session, and then rallied throughout the day to close slightly higher. The “dead cat bounce” that we have suggested in previous blogs has now been satisfied.  Keep in mind:  Tuesday is a Fed day and we always suggest moving to the sidelines during these volatile sessions.  Fed “daze” are often the most volatile sessions in what is a very volatile market.

The daily StoRSI, our momentum oscillator, has  flattened and is now “waffling” near its upper range.   Another strong day will drive momentum to its overbought range.  A day of unchanged activity or a down day will force StoRSI to continue its journey toward the lower trigger level.  Today’s session could set the tone for the next week of action.

The T8 (maroon line), our moving average that defines trend, continues its downward direction.  We believe that when price retraces to the T8 (our trend) that there is a high probability that if the trend is down, price will be resisted.   The T8 continues to tell us we are in a steep downtrend.  It will be extremely interesting to see if a short, triggered by and opening  above the T8, can be executed successfully on Tuesday.  Usually, this simple approach can be quite rewarding.

Monday’s candlestick was a large white candle.  If the market would have closed at its highs on Monday, we would have a piercing line formation.  Since it did not, the white candle has little significance…although, white candles are always welcome if a trader is looking for upside potential. 

***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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