Swing Charts of the Dow and Bonus Swing Charts

Sep 10, 2007: 7:34 PM CST

In the past, I provided various examples of “Swing Charts” which focus mainly on price, momentum, and connected swings in the market. Here, I provide a few examples of the current swing perspective of the Indexes and overlay basic market structure patterns to the indexes:

The Dow Jones Weekly Structure:

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We see three changes in angular momentum, indicating price was on a rapid acceleration upwards until the recent volatility. Notice how the angles of the trendlines below price increase before the recent decline took us to the rising 50 period moving average.

Price has made a lower high and a lower low – the uptrend that has been established and confirmed is threatened by recent price action. Should price take out the most recently formed lower low at 12,500, we must classify the weekly trend as ‘down’. Until then, the uptrend trend is threatened by the recent swing structure.

Price is beneath the rising weekly 20 period moving average, yet above the 50.

Dow Jones Daily:

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Price recently flipped color to “yellow” or “neutral,” as determined by an ATR function.

We do see a recent negative momentum divergence that has developed as price has established two recent ‘upswings.’

Price is in a confirmed and established daily chart downtrend, as price has made a lower low, lower high, and taken out the recently established lower low.

We can expect the 200 period moving average to serve as potential support, provided no majorly negative news arises between now and the September 18th Fed Announcement.

Let’s zero-in on some interesting chart patterns on some of the stocks of the Dow Jones Index:

IBM Daily:

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IBM has been strong this year, yet is showing a negative momentum divergence as price experienced a ‘failure test’ of the most recent high, setting up a potential short-sell trade. The recent positive momentum divergence led to the retest trade which has been completed.

Price has established a strong trendline, and the confluence of the moving averages may serve as further support.

The Chart of Intel (INTL) looks strikingly similar to that of IBM.

Next, Wal-Mart:

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Wal-Mart (WMT) has ‘fallen off the cliff’ and is making new price lows for the year. Weak retail sales and general negative sentiment on the US Economy have sent this stock lower and into a confirmed daily downtrend.

Wal-Mart tends to be a bellwether of the US Retail sector because of its size and influence. Keep watching this chart for possible clues regarding the future price action.

Finally, Exxon- Mobil (XOM):

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Exxon-Mobil has been in a strong uptrend, driving higher all year until the recent price volatility slashed the stock from $94 down to $80 in just over a week.

Despite the large volatility move to the downside, price is barely hanging on to the definition of an uptrend, but is moving more towards a consolidation trend definition. This stock is closely tied to oil prices, so those trading in this stock would do well to analyze oil futures as well.

There’s a lot of interesting patterns out there on the charts right now. There are a lot of ‘busted support’ patterns and price/momentum divergences setting up. I suppose it would be best to wait until the market clears up following the Federal Reserve announcement, but there will still be some possible volatility or swing trades that set-up until that occurs.

Until then, be safe.

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(Charts courtesy TradeStation)

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