I was saying yesterday, “what happens next could be the Sell Signal of the Month. A solid break back through 23,800 would tell us that players are leaving the game.” Well, looks like they did. Once we breached that key level, it was down to just above 23,000 – the Grand Daddy Support level on the Dow. One interesting artifact I noted – the Measured Gap that formed intraday. This is HIGHLY unusual. Gaps that big don’t form often in real time charts. But it did, which meant selling pressure became fierce right there. Of course, this kind of Gap predicts the 1/2 way point in a move – and that’s what it was.
DJIA – 15 Minutes
I was also saying yesterday that “We are now very close to the 23,000 level, and I expect support to come in there – if only temporarily. This market likes to buy pull-backs, and this may just be another one. I think at this point, 23,800 is key in the short term, 23,000 in the long term.” In the Daily Chart, we see the wide consolidation formed with that key Support Level just below today’s close. And that’s precisely what it is.
Will the market break 23,000 tomorrow? We don’t need to prognosticate. If the market gaps big to the upside at the Open (more than 1%) I’d enter, albeit cautiously. On the other hand, if it lazily meanders on a steady climb, I’d look for some profitable day trades on the Long Side. However – if it solidly breaks 23,000 down – look out below. I would eliminate all Long exposure until the market can get back above that level. A little protection goes a long way!
DJIA – Daily
I was talking yesterday about the looming specter of deflation, and more articles are appearing about it. That’s where people stop spending because the same goods will be cheaper tomorrow. I’ve been looking for a car and noticed the deals are getting better. So why get one now? I can wait a few weeks or a month. That’s how it goes. Google says, “…deflation discourages many desirable factors in the economy – production, investment, employment and thus economic growth. The major side effect is that it is a disincentive for the producers.”
Today was a pretty big Fear Day. Think about all the investors around the world looking at these charts. Many will say, “Wow, a great buying opportunity!” But I think most will be thinking, “Hmmm. Could this be the start of another correction?” There is plenty of negative news. Fortunately, the Chart Tells All, and we can continue to use 23,000 for long term Support. We could be right there, folks. I don’t think closing Long Positions is necessarily justified – unless we break that key level. My best guess? A rally off this level tomorrow (or quick pull back to it and then rally). I just think 23,000 is a belwether “line in the sand” for the Dow.