Unstable Situation. Friday’s Open Could be Explosive.
From yesterday… “Wednesday’s action is Bullish going into Thursday, but we still need to watch this important (26,300) level for any kind of strong, downside break.” … and that’s what we got – a very strong break to the downside at the Open, followed by a meager recovery – right back to the 26,300 line! Looking at the 39 Minute Chart, it’s easy to see the instability. I have marked two dotted lines in that chart, which I call the Action Zone. I suggest watching for breaks of either line Friday – I would expect the resulting move to continue into Monday.
Looking at the Daily Chart, we see that the range which has formed over the past few weeks is a narrow Consolidation itself, which appears to be breaking to the downside. The Daily Chat HAS been generally bullish but that is now in serious jeopardy – a continued push down below the 26,300 level will be quite negative, essentially setting us up for a fast move down to 25,000.
DJIA – Daily
I had said yesterday that “The 26,300 level is such a clear Support line in the Dow chart. If it breaks through, that will indicate severe weakness has suddenly entered the market, and a move down to 25,000 is then fairly likely. – reaction at these levels can easily turn an impulse move into a full-blown stampede.” We didn’t exactly get a stampede. After the initial pressure bled off, the market clawed its way back to the important level. Should be easy to trade Friday and Monday. We have a clear Action Zone, which is simply a buffer around the Support Level. I think the breakout from that Zone is what is going to give us direction for the next 2-3 sessions.