Today’s action was surprising in the degree and reliability of the (intraday) trend, especially given the down trend (intraday) yesterday and its smoothness. Today’s trend swung with reliable entries and position addition points, which could have resulted in a rather large profit.

First, the Dow reversed course when it reached support at the daily convergence of the 20 and 50 period moving averages (remember, traders cause action, not indicators).

Daily Chart – DIA

Dow Jones Swing Chart – Daily

Observations:

• Confirmed (short-term) uptrend
• Support found at moving averages, stopping the down-swing
• Momentum divergence is occurring (see bottom panel indicator) – this is ok and is not a concern yet
• The technicals of the market appear stronger than the “doomsayers” and “recession predictors” indicate

Today’s intraday action yeilded a near textbook trend with the 20 period moving average as entry signals (again, simple signals are often preferable)

DIA Intraday Chart – 5 minute

Observations:

• The Trend signal (signal line) crossed zero at 9:00am and indicated the likely end of the down move.
• The Low of the Day occurred at the support zone created by the daily moving averages, triggering a longer term trade
• A “Sweet Spot in the Data” trade (playing for a larger target) occurred with a new higher high around 10:30
• An “Impulse Buy” trade set-up occurred with the 10:0am pullback after the New Momentum High (and new price high).
• Following trades could be taken to the long side when price pulled back to the rising 20period Moving Average
• The Momentum Divergences should be a warning signal, but not enough to keep you from trading long (just not on leverage)
• The Trend became a “Creeping Trend” which punished anyone trying to short it (trade countertrend)

With the market still chugging higher, odds still favor continued upside, especially following the quick counterswing which was terminated at the moving average support.

We are looking similarly (in terms of data and price action) as we did after the “shock” decline of May 2006. So many people doubted the market, yet it continued to rise in an “oozing” or creeping trend which also punished those who fought it, yet few people rode the trend because of all the ‘doubters’.

Realize that Bull Markets climb a “Wall of Worry.” Until price falls below support AND makes a lower low, we are still in a technically confirmed uptrend and odds favor long (buy) trades.

If anything, do not fight this creeping trend by betting against it. That behavior is exactly what keeps the trend oozing (by shorts covering).