DIA Intraday May 1-3

May 3, 2007: 9:39 AM CST

I’ve posted a chart of the 15 minute action of the DIA (Dow Jones ETF) for a study on momentum divergences.

dia-15-min-may3.jpg

This illustrates the buy divergence occurring around noon on May 1st which led to the “Impulse Buy” trade concurrent with the breakout and new momentum high.

The market has ended a buy swing and is now consolidating in price, and subsequent ‘higher highs’ are resulting in momentum divergences, indicating consolidation at best and retracement as likely.

The price action also visually confirms the decreasing momentum (buying pressure) as price struggles to make new highs. Support appears to be at 131.88, but should this level fail, odds favor continuation to the downside. For now, I expect continued consolidation before the all-important “Jobs” report and economic data Friday.

If you’re unaware of this data, realize that the Jobs Report (first Friday of the month) has the potentially to move the market dramatically (sometimes over 150 points in the Dow).  What usually happens before this report is market consolidation as traders are usually unwilling to take positions before the report and often prefer being ‘flat’ prior to its release.

Nimble Day-traders often can profit handsomely from the sudden volatility that occurs as a result of the report, should the numbers differ from consensus.

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