Friday, October 29, 2010
Finally. It's official - the uptrend is over. We have now (finally) broken the RTC daily uptrend in the Dow extending back to the end of August. Tuesday's doji was the top, yesterday was the bearish setup and today's 12 point decline, finishing well below the lower RTC line was the trigger. I think we can now look forward to at least a few days of lower prices. There are several minor support levels on the way down, corresponding to the steps the Dow took on the way up - at 10,970 and 10,825. The lower Bollinger band stands nearby at 10,820, suggesting a possible stopping point. Then there's a stronger support level at 10,685, corresponding to the August highs.
This is followed by the 50% Fibonnaci retracement level at 10,571, a 5% correction at 10,558, and the 200 day MA at 10,525. The close proximity of those three numbers suggest strong support there too. In the meantime, we will now start charting a new descending RTC channel starting from two days ago and watching for an upward break out of it. My guess would be that might happen next Wednesday, the first trading day after Election Day. I know everyone says the election results are already "baked in", but I do think the immediate realization of a Republican victory should provide at least a temporary bounce to the markets.
Finally I note that the excllent Quantifiable Edges blog here did a historical analysis today and reached the conclusion that "the stats seem to suggest a possible downside edge over the next 1-3 days." We'll see.
I made no trades today. I'm now over 50% in cash and considering taking a position in SDS tomorrow as a short proxy. I'm also pleased to see that AMD, which I mentioned on Monday when it closed at 7.26, was up 3.81% today on a lackluster day overall to close at 7.63.