May 17


Market Commentary for May 18, 2020


May 17, 2020

Rally to New Resistance at 23,800.   Expecting 2nd Lower High to Form.

For yesterday’s market, we talked about two scenarios, (1) a solid break of the 23,000 level and (2) the potential for a rally.   “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 ..if it lazily meanders on a steady climb, I’d look for some profitable day trades on the Long Side.”

The break of 23,000 happened right at the Open, after which the market continued up all day.  Looking at the 15 Minute chart for the session, we see a very wide range formed.  This could be the new normal, with Resistance now at 23,800.  Given the movement we saw, I will jump out on a limb here and say I do NOT think the 23,800 level is going to be crossed to the upside Monday.  But, remembering that the Market is always right, it could do this, and in that case the bullish forces in this market will be evident, and there could be enough support to again push us up into the wide range marked on the Daily chart.

DJIA – 15 Minutes

We can still see the very wide consolidation range formed in the Daily Chart (see prior posts) – but there is something else that is now quite visible:  A Lower High.  Could today’s upside move form another even Lower, Lower High?  I think that is what is going to happen, and if so, that would be quite negative.  But we could be range-bound for a few days.  I  think we are going back to 23,000 and will eventually break it.  But in any case we now have our two key levels for the next days to week – 23,800 up and 23,000 down – with explosive move potential between and through them.

We have been talking about deflation, which to me is the biggest negative facing the market right now. 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.”  Fortunately, the Chart Tells All, We can continue to use 23,000 for long term Support.  I don’t think closing Long Positions is necessarily justified yet – unless we solidly break that key level. It’s clearer than ever before that 23,000 is a belwether “line in the sand” for the Dow.

Ed Downs

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