Daily View from the Top

Mar 6, 2008: 5:33 PM CST

Let’s take a quick look at where we stand and were we may be heading on the US Stock Market chart, using the Dow Jones Index as our proxy.

I don’t normally draw so many lines on the chart, but there are a variety of support and resistance levels, many of which I have not drawn.

Notice the major confluence of resistance that took place at the 12,300 level in terms of the overlap of the recent triangle, which was just beneath the falling 20 period moving average. In addition, the market had just ‘busted’ an upside break of the triangle, and failed moves (or unexpected moves – if everyone thought the market was going to break higher) often can be stronger than expected moves.

As it stands, the market has significant resistance above, and little resistance beneath, combined with the fact that the market has been in a sort of holding pattern (consolidation) since late January.

A retest of January lows seems likely, but do note the non-confirmation coming from the reduced volume of today’s trading. With such a large volatility price move down (-1.75%), shouldn’t volume be surging? The fact that it is not is not confirming lower prices currently.

While this fact is not inherently bullish, it does create a small bit of doubt for the bears until proven otherwise.

It will be interesting to take a new look at the weekly charts, as well as the daily charts of different markets this weekend.

Until then, trade cautiously in this environment.

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