Teach Talk Trade Day Trading & Technical Analysis

DOW Directions 12-31-07 (Monday): A Daily Technical Analytical View of Stocks, Furtures, Eminis and Forex for online and day traders.

DIA (Dow ETF): Happy New Year!

The DOW suddenly stopped its upward momentum on Thursday and on Friday chopped in a narrow range.  The market closed up six points on the day. After moving up four consecutive days, the DOW succumbed to its overbought conditions on Thursday and then did little or nothing on Friday.

The StoRSI, our momentum oscillator, reached overbought trigger levels on Wednesday and abruptly reacted on Thursday and Friday with a sweeping reaction to the downside.  We are now halfway down heading to the lower trigger level and the odds favor further downside to start this week and the new trading year.  Usually, the market will continue down until the oscillator hits its lower trigger. This could take a couple sessions to accomplish.

The T8 has flattened and the trend has become anything but a trend. The flat T8 gives us little hints as to the overall direction of the market. As soon as the T8, our preferred exponential moving average, decides to take on a positive or negative direction, we will have a much clearer undertanding of how to position ourselves in the coming new year.

The candlestick formation, posted over the last three or four days,  gives us very little clues as to what is currently happening.  We will wait until we see a significant candle posting to position ourselves in this market.

***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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