Dow, S&P, and Crude at Critical Chart points

  • Posted on: July 21, 2010



Taking a look at some charts late tonight. The Dow Jones Cash looks like its poised to take a Summer Dump down to the 9600 level. Basic Technical analysis confirms that the intermediate (3 to 6 months) trend is lower. We have had lower major lows and lower major highs for the past 3 months. Its funny how people discounted the “fat finger” 1000 point mini crash, or however we are characterizing that one day 1000 point spike lower in the Dow. The market digested its significance, and then basically discounted its low. The market has been telling us since then that we ought to be selling rallies. Down side target for the Dow? It would have to be 9800 and then 9600.

For the Broader S&P index, 1010 looks like the downside target we should be focusing towards.Certainly a failure of key support at 1040 would make the 1020 and re-test of 1010 simply a matter of time.

We are at a critical point in the development of this intermediate trend. Summer time markets with their corresponding lack of liquidity could prove the underlying force which gives us one more test of the 1010 level in the S&P cash and the 9600 level in Cash Dow.

This fits into what I’ve been talking about for the past few months. Longer term, I see two things 1) a Sideways to lower 1,000 point trading range and 2) Potential for more 300-500 point plus moves either higher or lower for the Dow cash. There simply is a dearth of volume, and combine that with hft boxes which characterize a good percentage of trade at this point and I just don’t see things any differently.

Finally in the Crude Oil, I included this chart as well. Crude has a major impact on our economy, and influences a large amount of trading in a myriad of markets from the indexes to cattle, grain and oil seeds.

Interestingly, crude looks like it is on the verge of trading through the apex of a large bearish symmetrical triangle. Honestly, the crude could either rally or break, but in my opinion, a mover lower exacerbated by a settlement below the support trend line could prove very detrimental to crude prices, as well as prices for many other commodities who move in sync with crude.
Right now there is a 5.00 air pocket below crude’s settlement today at 77.44. The trend line below gives us a target of support roughly at 72.50. A failure of that level to sustain support opens a move sharply lower down below 69.00 a barrel.
Of course the bullish scenario suggests that, a settlement above 78.50 opens the flood gates for a rally back up to the high 80’s.

Only time will tell. However, in my opinion, it looks like a move downward is more likely.
Why? Because we are in a 3 months sideways to lower trend already. Bearish symmetrical triangles, like the one defined by the two trend lines in crude, suggest crude may be poised for a price adjustment lower.

As always, use your stops, make your own decisions, and respect the risk.

Good Trading