New Consolidation – New Target at 27,600
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“.. we have the classic definition of a Consolidation. If anything like what I drew in the 39 Minute Chart pans out, we will be consolidating at highs, which is Bullish.” So Wednesday we continued up and formed a new, small Consolidation in the middle of the range from 26,100 to 27,600. This is a Continuation Pattern that shows a high likelihood of hitting that upper level over the next 2 sessions.  It’s actually a beautiful formation because the range is so small – a great place to guide market-based entries and exits. Long above, Short below – it’s  usually that simple.
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DJIA – 39 Minutes
“..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.”  In the Daily Chart, we see the lone bar poking up into the upper range – clearly a reach for the top of the channel at 27,600. There is enough bullishness in here to warrant a continued move to that level. Will it power through to market highs?  Don’t think so, only because of earnings and other news.   But there was also good news on the coronavirus today. Europe liked it. It could be that the market has so discounted the economic impact of the pandemic that it will celebrate this kind of news by continuing its buying spree, unabated.  Watch the levels. They will show us the way.
DJIA – Daily
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“..Does this volatility portend the start of a new bear market? Unlikely at this point…” Today’s move – a Gap followed by a Consolidation is classically bullish where chart reading is concerned. For tomorrow, we need to watch the base of the range at 26,700 for a potential rally failure. Even though Consolidations are typically bullish patterns, they can fail. When they do, the potential for downside movement is very high. All we have to do is watch the boundaries I drew in the 39 minute chart to point the way to where the market should end up Thursday – if it behaves itself.
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Ed DownsÂ
