Caution:Â Support Has Become Resistance.
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“So, the way to bet today is for an upside move to the top of the narrow range, but that’s just what to expect. What we want to watch for is a break of the narrow range. ” A break of the range happened early in the session. From there, as you can see in the intraday chart, the index rose precisely to the Support line and turned down, turning Support into Resistance. That is bearish, my friend.
DJIA – 39 Minutes
The Daily Chart continues to show the wide range, with Long Term Support at 25,000. We have the sub-range marked (25,750 to 26,300), which is operative right now. I mentioned yesterday that, “because the narrow range is at the bottom of the wider range, I can make the case for a break of Support and a continuation to the bottom of the wide range at 25,000.” I think that is likely what started yesterday.
DJIA – Daily
We have now broken 25,750 to the downside and see weakness. This is a pretty big warning sign to me. If the market follows through Friday with a push down, we could see some explosive selling. The most likely scenario at this point is a push down to Major Support at 25,000. Â
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Positive news (stimulus, coronavirus vaccine, employment news, etc.) could push it back above 25,750. That is always a possibility and if that occurs it will mean there is enough strength to bolster the market back into positive territory. However, given the pattern and current news I think the most likely scenario today and possibly Monday is that we are going to see a sell-off.
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Ed Downs
