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The Indoos may have seemed resilient yesterday, but they got shoved down far enough intraday to extend Wednesday’s selloff into a bearish impulse leg on the daily chart (see inset). Predicting where to get short for the next leg down would be a shot in the dark at the moment (i.e., Thursday night), since the Dow could rally to as high as 10474 before it sevens out. In any event, I’d suggest using the 15-minute chart to jockey into position to short the 3- or 5-minute chart via “camouflage.” The “15″ divulges, for one, that yesterday’s 10269 low still has 50 points to go before it reaches a clear (clear enough to bottom-fish with a very tight stop-loss, if you please) target at 10219 (A=10678 on August 10 at 4 p.m. EDT; B= 10428 on August 11 at 10 a.m.)
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The Dow didn’t fall far enough to create an impulse leg on the hourly chart, but the weakness was nonetheless sufficient to create a so-far bloodless duel between bulls and bears. If the Dow does a 180 today for the usual non-reason and heads higher, you should use 10645 as a target, since that’s where DaBoyz will be taking it once they recover their mojo. For clues that this may be about to happen, watch for a midpoint bounce on the 15-minute chart similar to what I’ve sketched out.
I mentioned a 10572 rally target for the Dow in today’s commentary; the chart show its provenance. The midpoint resistance lies at 10445, just a few points above yesterday’s high, so we might expect quite a bunny-hop if it is taken out. Will it be? The suspense is killing me.
Bears who are primed to panic on the next 100-point rally should take a look at the Dow’s weekly chart before they jump: heavy, heavy, heavy! It’s difficult to predict how high, or even whether, DaBoyz will be able to squeeze the blue chip average this week, but we’ll be watching vigilantly each day for opportunities to get short. Assuming yesterday’s low at 10186 is not taken out first, a midpoint resistance at 10286 shows promise. If it gives way, however, buyers would be telegraphing more upside to as high as 10387.
I’ve provided benchmarks in today’s E-Mini S&P tout by which we could judge the staying power of any short-squeeze that may be lurking. For the Indoos, the squeeze would need to surpass 10488 to have entertainment value for us, and the rally would need to be unpaused on the hourly chart once above 10315.
DJIA – Dow Industrial Average (Last:9870)
by Rick Ackerman on June 30, 2010 12:01 am GMT
The downtrend projects to 9431, implying another 440 points of creative destruction over the near term. The feverish short-squeeze at the tail end of yesterday’s session racked up 80 points, hinting that DaBoyz might be more eager to sell ‘em near the top of a phony rally than to buy ‘em at whatever ostensible bargain-basement lows might obtain intraday. Still, with the July 4 holiday coming up and no clear call on whether America is taking Monday or Friday off (or perhaps both) bullish seasonality will be ratcheted up to the max. We should therefore be on our guard against the gratuitous leap higher, since it is hardly a longshot bet. It would be telegraphed in subtle fashion with a print exceeding 9967.57 on the 5-minute chart.