Touchdown: For those that followed along with the short done on YM in the early going this morning, with all targets hit we should be taking at least some off the table as profit here.
INDU – Dow 30 Industrials cash index has now hit the final target for this week as it revisits the March lows; only the February 2005 low now remain as a final bastion of potential support:
INDU – Daily
Its important to put this test in context with the big picture – up to this point the dominant trend – UP – remains intact albeit price has been moving sideways in the shorter time frames (daily) in range now for several months. This price action is the very definition of trendless, although the swings have certainly been tradable in the short term.
INDU – Weekly
IF price breaks througth the 2005 lows now not far away and begins to trend lower – for my purposes any trend which emerges in a 45 minute chart or higher time frame (daily) will do – we have to conclude that the broad up trend which started in 2002 has ended, until proven otherwise. A trend we will all recall, is a series of higher swing highs and higher swing lows in an uptrend, and exactly the reverse in a down trend.
We should not expect immediate or dramatic confirmation of this, nor should we fear buying if suitable setups show up here at this test of bottom – the purpose of this note is to set the context for the next few days, perhaps 7 – 10 days, so that should it become necessary to flip from being generally in favour of stalking the long side to generally cautious or short. We are nearing that point.
At the same time knowing the importance of this area of support can assist us in deploying cash for new longs when all looks bleak. If it appears that support will hold, significant rallies can be expected – at least sufficient enough to get new positions quickly to break even stops.
05.04.01 14:13 #