Teach Talk Trade Day Trading & Technical Analysis

DOW Directions 01-29-08 (Tuesday): A Daily Technical Analytical View of Stocks, Furtures, Eminis and Forex for online and day traders.

DIA (Dow ETF): Market jumps +176.72 as volatility continues.

Monday’s action saw the DJIA climb up +176.72.   The DOW continues to swing wildly on a day to day basis.  Friday’s big drop was matched by Monday’s large gain.  Volatility continues to be the outstanding feature of this market.  Last Friday, the market attempted to continue its rally and was met with resistance when the market opened above the downtrending exponential moving average (T8).  Monday, the market opened below the T8 and closed above the T8 (our exponetial moving average).

The StoRSI, our momentum oscillator, has penetrated its trigger level of +90 and is now overbought by our objective standards.   Near term appreciation could be difficult.  The weekly momentum is a completely different story. The weekly StoRSI is bottoming and this is a very positive sign for the market. We always suggest and encourage traders to look at and analyze the weekly charts. For the moment, comparing the daily and weekly charts leads to a somewhat confusing picture: expected weakness in the daily charts, but expected appreciation in the broader, weekly time frames.

Last Friday, the market opened above the downsloping T8 and we sold the market based on those circumstances.  Tuesday’s opening could easily be higher than the T8 and we will be pursuing the same strategy: shorting the DIA if it opens above the downsloping T8.

Monday’s candle was a large, white candle of little or no consequence.  

Please keep and mind and read the following thoughts on volatility. We have been preaching about volatility since August and we don’t believe that things will calm down for many, many months.

***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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