I left to go out of town on Friday around 3:00 in the afternoon when the Dow ($INDU) was only in its early slide that knocked out over 250 points in the last two hours of the day. When I shut my computer down, the Dow was down less than 100 points, above the support line that held last week. This was the ideal time to stop looking at the markets before our weekend vacation to the mountains. I figured support would hold. Well, that didn’t work as planned and at least we had a good short vacation without worrying about it.
In this week’s chart I might have drawn too many lines in the hopes that one is telling us something. Basically what that means is that it could be anyone’s guess now that we’ve broken some key technical support areas. The futures are up this morning, but that could change at any minute based on the massive swings we had last week. I went back a full year for the weekly chart in the hopes of finding a more long term picture and doing so I lose a little of the precise marks that I’ll come back to in the coming weeks. This week’s Barron’s pointed out that we are in the middle of the 6-9% correction range that has held support during this bull run, but the contributing factors are different this time. Aren’t they always?
The line that is most disturbing is Line D that was the previous floor a few times in the past couple of months. We fell through it on Friday afternoon. Line C used to be a ceiling and then became a floor and now is ceiling again as the Dow bumped its head on it during the mid-week rally last week. Line B could be another line of short-term support in the downward direction of this correction as it was a floor and ceiling earier. Another likely target is Line E which goes back a full year and has not been broken since. That’s also close to the 50 week moving average which can offer strong support sometimes. Hopefully we won’t go as low as Line A which I drew from the highs in October 2006 and the lows in February and March 2007. Line E is also around the 12000 mark which could offer some more pychological influence.
Based on Friday’s price action I feel the need to lighten my load again, but would like to let it happen through the expiration of my August options if the markets can hold on for two more weeks.
Click on the thumbnail for a full sized chart.
Technorati Tags: investing, stocks, trade, stock chart, $INDU
How about down 280 then up 280? Weird. Is someone pulling strings?
If someone had of bet the farm on a down market Friday, then bet the new farm on an up market Monday, I guess they would be done trading for awhile with that huge windfall.
The rest of us get to keep trying.
I need some more up moves before August expiration too.
Yesterday was weird for me that I lost big on FWLT and MRO while the major indexes recovered. Today worked though as I stayed out of sync with the Dow – I gained $1200 and the Dow was up only 35.
I hope to see some good follow through on Wednesday with the good end of today and the CSCO earnings kicking ass. I’m glad I got in, but wish I had gone in bigger of course.