Bulls spent the week in thin air before exhaustion set in on Friday. Will the downtrend get legs? The best way to tell is to watch minor corrections, since a growing tendency to overshooting their ‘d’ targets will imply that the selling is getting stronger. Correspondingly, we should see rallies fail to reach their ‘D’ targets or even Hidden Pivot midpoints. The 363.15 target given earlier still obtains, and DIA would in fact become a fetching ‘mechanical’ buy if the pullback comes down to x=340.30. For now, we’ll just spectate. _______ UPDATE (Jul 19, 6:37 p.m.): Very heavy selling drove DIA well below the mechanical-buy ‘sweet spot’ at 340.30. However, using the same a-b coordinates, I allowed the trade anyway when a still ongoing rebound triggered it at 339.68 in the final seconds of the session. This gambit is riskier than I’d prefer — not because the bounce won’t be sufficiently robust to reach my profit-taking level at 341.99, but because this could conceivably happen in the dead of night. The E-Mini-Dow has already rallied 300 points off the low and would signal a profitable exit if it hits 34,109. Whatever happens, you should plan on taking the entire position off at p=341.99, provided you have access to DIA in off-hours trading; or by shorting the E-Mini futures ‘against the box’. As far as I can surmise from discussion in the chat room, no subscribers took the trade. _______ UPDATE (Jul 20, 9:20 a.m.): The trade worked precisely as anticipated when DIA topped at 342.28, an inch above the red line, in the middle of the night. Also as expected, it retreated sharply thereafter, with the E-Mini Dow following exactly the same path. If you did the trade using 400 shares or four contracts, you should be out of it now with a $900 profit on the ETF or a $4800 profit on the futures. _______ UPDATE (Jul 20, 8:45 p.m.): I don’t trust this bounce. Here’s the case for a short from near 346.54. _______ UPDATE (Jul 21, 10:45 p.m.): Playing catch-up with index futures, DIA opened with a powerful gap higher, negating the short I’d suggested. We’ll repair to the sidelines as the Indoos waft into a wide layer of heavy supply created by last week’s records highs.
DIA – Dow Industrials ETF (Last:347.97)