Teach Talk Trade Day Trading & Technical Analysis

DOW Directions 12-26-07 (Wednesday): A Daily Technical Analytical View of Stocks, Furtures, Eminis and Forex for online and day traders.

DIA (Dow ETF): A new leg up or approaching oversold?

The DOW continued up on Monday and closed higher close for the third consecutive day. The market closed up  +98.68 points on the day. After being supported, early last week, the DOW and the other stock indices have bounced and are now at or near resistance.  

The StoRSI, our momentum oscillator, is now approaching its upper trigger level.  As soon as the StoRSI turned up, the market rallied for three days.  If we only use the StoRSI as a guide, the market could rally for the rest of the week as the momentum oscillator moves above its upper trigger level.    Usually, issues have positive sessions as the StoRSI continues on its path to reach the upper trigger level.  We would suggest short sales on retracements to the T8.

The candle formations of the last few days give no clues to future direction.  If the momentum reaches an overbought situation in the next few days, we will be looking for a significant candle formation, at the top of this current run.

***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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