Solid Break of 26,300 – Will it Hold?
Tuesday, the Dow turned upward to break the Resistance Level at 26,300 for the second time in two sessions. And we appear to be forming the start of a Consolidation, and I have marked a potential path for this in the 39m chart. Of course, it won’t play out exactly that way, but with yesterday’s Up-Down and today’s Down-Up motion, we have the classic definition of a Consolidation. If anything like what I drew in the pans out, we will be consolidating at highs, which is Bullish.
The Daily Chart shows the wide range, with Long Term Support at 25,000. We have the sub-range marked (25,500 to 26,300), which was solidly broken today. I mentioned yesterday, that “The smaller trading range is at the base of the wider one, which is bearish until the market can break solidly above the smaller range – and HOLD.” So will it hold? With today’s solid move into positive territory above the small range, we have to conclude the market probably has enough Chutzpah to consolidate at highs and move higher. But as we’ve seen, markets can turn. We must watch the (now) Support level at 26,100 for a possible downside break.
This market is a new ball game. We haven’t seen swings like this in quite a while. Does this volatility portend the start of a new bear market? Unlikely at this point, but we must continue to watch the base of the new range at 26,100 to see if it is violated. If so, then it probably is. In any case, with several 2.5% swings in the last two sessions, I would expect more of the same. it’s fairly easy to make money on momentum plays as each swing gets underway.