DOW - ES Charts 16/12 - 20/12

[ChartMan]

What a nice start to the week . Watching the ES and the Dow convinced me that I mustn't let go of the Dow when it comes to figuring out the next moves. It wasn't clear from ES, but it was crystal clear from the Dow. On the other hand, there were some clear cut clues watching ES volumes... Perhaps not so much clues , rather big warning bells. I guess this is one of those days that even CT would have delivered the goods, not that I know much about the strategy. However, for those that take a longer view, trading the 100MA would have netted you the whole rise from the first pullback at 8470 to the top at 8628. Maximum pullback was 30 points and the maximum excursion outside the 100MA was -7 points. Remember one of the old rules :- " if you are in a trade, stay in while the price is within the 100MA, +/- 20 points untill it resolves outside this band".
I commented in the chat room that although the dow looked topped, there were no classic TA signs of a reversal. That was around 5pm.
Notice the two moves on RSI from 80 to 30 that only moved the price 25 odd points. That tells us that the market doesn't want down. The main bull flag developed over lunch has a target of 8700.

 

[ChartMan]

Great day, with the open gapping up 8 odd points...Friday's closing divergence obviously delivered, but it doesn't always. The clear RS Switch after lunch delivered the goods.50% Fibs between the 00's and 05's are great indicators for direction.

 

[ChartMan]

Looking at the volumes, it is clear that the sellers never really got above 2k/min after the open. The battle at 50% 897.5 was a clear outcome with the downtick volume slope in decline. The same at the 902.5 50% battle.Both these resolved in big up ticks. A closer examination of the volume would show that just prior to these decisions, the up and down tick volume had virtually dried up . These were tah warning bells mentioned in the Dow post. When volume dries up, you'd better be sure that you are in the right direction as a big move is on the cards. At these points, RSI was over 50, CCI was over 100 and the price was well above the 100MA, telling you that the likely outcome was going to be to the up-side.

 

[ChartMan]

Well, that was short lived! The open saw us drop 10 points below the 100MA and bounce right up, at one point looking as if it was going to make 8700, but it failed to make uptrend resistance and that was that.Confirmation of down was given by the tiny pullback just below the 100MA.Another easy day to trade following the 100MA . Again, the maximum excursion was less than 10 points, giving a nice comfort zone on the puulbacks to help you stay in. There i sno sign of this thing turning around so we need to look at the double top recently formed. So we have a downside target of 8450 to look forward to and no upside til a retest of 8600. Just prior to the close, you can see an Inverse H&S formed. If that breaks out above the 100MA, then we'll get some upside....

 

[ChartMan]

Interesting how the 100MA doesn't really work for the ES, but it does for the dow.It seems that ES is more responsive to Fib levels, with 50% being prevalent. The dow doesn't seem to hang around the 50% level, rather moving above or below to the next level. Not what I would have expected seeing as they are supposed to be "linked".

 

[ChartMan]

No real clues as to the top here, other than you would be watching it as yesterday's high, so forming a double top. playing by volume alone, you would think that at 910 there was more to come.....although the second peak showed volume divergence but the third one didn't. More work required to identify tops and volume. Still, if you got the double top, the divergent bottom was a giveaway, with a substantial drop of in downtick vol at 16:06.

 

[ChartMan]

So we closed at 8447 , 3 points below the downside target of 8450. We've now had quite a few tests of horizontal support at around the 8420/8440 level so that may now hold. That gives us some upside space to around 8600.RSI banging on the lows at 20 would support that too, as well as developing an expanding triangle into the bargain. Volumes on ES were very low today, so it's hardly surprising that the index didn't move too much.

 

[ChartMan]

Slow and boring day, with all the action coming pre-trading to lunch time. Still, there was quite a lot of points on offer...

 

[ChartMan]

Barring the odd wild excursion, the volumes were very low today, making any move suspicious....

 

[a320]

Good post chartman, i think you was responding to my northern doji call on the dow 15min candle on 16th in the chat room.
You were correct to say there were no other TA signals to call a top, the doji means there is a balance between buyers & sellers and the trend might be "tired" but as chartman says, you need other TA signs to point to a possible reversal, which we didn't get so the trend was still up.

I would also like to say hello to everybody as this is my first post, and thank you for all the help and advise in the chat room

 

[dsmodi]

A Head and Shoulders pattern has been created on DOW. If broken to downside, then that could lead to a downside move of upto 400 points...

The weakening of the U.S. Dollar together with the strengthening of Gold Bullion prices, the implication is that a downside break is about to explode

A similar pattern has developed on the sp500 as well.... European indices are breaking support at the moment as well.

I'd have posted some charts as well, but there seems to be a problem doing this at the moment....

(All IMHO ofcourse.... )

 

[Bill G]

A Head and Shoulders pattern has been created on DOW. If broken to downside, then that could lead to a downside move of upto 400 points...

Well spotted- from the H&S break its dropped 70 points upto now.
Bill

 

[ChartMan]

I'd say we've got a nice big Inv. H&S forming. Divergence is there too and clearly the market didn't buy the drop below 8350. Flash reaction to Bush's statement re Iraq?

 

[ChartMan]

Great trading range today, with some good prospects for tomorrow...Even lunchtime had some decent action, even though there seemed to be reluctance on volumes.

 

[ChartMan]

The open rally was well supported on volume, but I can't figure out what happened to the second one between 4 and 5pm. Volume supported the move and then it just died for no reason. The buyers were on the up and the sellers had gone home...Was that when Bush announced?

 

[Ian56]

The sharp move up at the open today was EW b of C for the move down from 8640.
C waves are notoriously sharp.
The European markets had their c of B moves at their open today.

The rest of the day until 8330 was a of C. A wedge pattern.

It looks like we are currently in b of C (a small rise).
When (or if) c of C starts it could result in a fast drop (just like Wednesdays open).
If we get this sharp drop, it should be followed by a VIOLENT rebound up. (An X wave.) Straight up, no pauses and 200 pts+.

Watch the European markets in the morning to see if this pattern starts.
The US will likely repeat whatever Europe does.

(It probably won't happen now I've posted this. Don't be surprised if it does.
The alternative count which I think is less likely is that wave C down has completed and we go up tomorrow.)

Regards,
Ian

 

[ChartMan]

We got our nice big Inverse H&S. Closing above 8500 was nice too, and a pretty much solid up trending day. A quick response to the 2 days positive divergence too. Where to next? Well for now, all we can look forward to is staying in the channel with 8600 tops. Xmas period is a funny time and I have seen reckless things happening. MM's hangover maybe?

 

[ChartMan]

Very whippy day today, but the overall moves were reasonable.

 

[ChartMan]

Another low volume day for the most part, but two nice divergent tops.