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Sunday, July 10, 2011

The 3 Dows...a look under a microscope...

Today, I'll have a look at the 3 Dows and 6 timeframes on each for possible clues on future direction.

Chart #1
  • Each candle represents a One-month OPEX period...the current candle will close this Friday.
  • So far, the candles on the Dow & Trans are bullish engulfing candles...while none yet on the Utils, it is still bullish and has the potential to form one.
  • All candles are above the current OPEX-period Pivot Point (PP) (short yellow horizontal lines), as well as above all of the previous OPEX-period PP's for this year. [The PP for each candle is created by applying a one-period simple moving average based on the (H+L+C)/3.]
  • There is no candle reversal signal yet on this timeframe.
  • They are all at or near the top of their (still expanding) upper Bollinger Bands.
  • There is no reversal signal yet on the MACD's (in spite of the negative divergence showing on the histogram on the Dow & Trans charts).
  • The Stoch's are above their overbought levels...the recent crossover of the Stoch's on the Dow & Trans would need candle confirmation to suggest a reversal is in the making.
  • So, while these indices are beginning to look a little toppy here, there is nothing to confirm that the uptrend will reverse yet on this timeframe.


Chart #2
  • Each candle represents a One-Month period...the current candle will close at the end of July.
  • So far, the candles on the Dow & Utils are bullish engulfing candles...the candle on the Trans is not a true bullish engulfing and a small gap remains unfilled between the close and the open/low of the current candle and the prior one...the candle is, however, bullish.
  • All candles are above the current one-month period PP, as well as above all of the previous monthly-period PP's for this year.
  • There is no candle reversal signal yet on this timeframe.
  • They are approaching the top of their (still expanding) upper Bollinger Bands.
  • There is no reversal signal yet on the MACD's (in spite of the negative divergence showing on the histogram on the Dow & Trans charts).
  • The Stoch's are above their overbought levels...the recent crossover of the Stoch's on the Dow would need candle confirmation to suggest a reversal is in the making.
  • So, while these indices are beginning to look a little toppy here, there is nothing to confirm that the uptrend will reverse yet on this timeframe. However, I wouldn't be surprised to see a retest of the prior month's hammer's low at some point.


Chart #3
  • Each candle represents a One-Week period...the last candle closed on Friday.
  • This candle has tested the highs of the prior week's large advance...the Dow & Trans closed slightly higher than the prior week...the Utils retested the prior week's high and PP and closed in between and down on the week.
  • The Dow & Utils closed above the one-week period PP of this candle, while the Trans closed below...however, the Trans has closed above all the weekly PP's so far this year, while the Dow & Utils have yet to close above their last swing high PP's.
  • There is no confirmed candle reversal signal yet on this timeframe...only a pause.
  • The Dow & Utils are approaching the top of their (still expanding) upper Bollinger Bands, while the Trans has pierced its (still expanding) BB.
  • Both the MACD's & Stoch's are hooking up after turning down with the May-June pullback...the MACD histograms are also rising.
  • There is nothing to confirm that the uptrend will reverse yet on this timeframe. However, I wouldn't be surprised to see a retest of the prior week's PP at some point.


Chart #4
  • Each candle represents a Daily period...the last candle closed on Friday.
  • This candle has tested the lows of the prior candle, but not the highs.
  • The Dow & Utils closed above the one-day period PP of this candle, while the Trans closed below...all 3 have closed below the prior day's PP and above Wednesday's PP...Wednesday's PP is likely an important level to watch this coming week.
  • There is no confirmed candle reversal signal yet on this timeframe...only a pause.
  • All 3 are back below the top of their (still expanding) upper Bollinger Bands after piercing the upper BB (and closing above in the case of the Dow & Utils).
  • Both the MACD's & Stoch's are within their overbought levels and the MACD histogram is just beginning to contract to the downside.
  • There is nothing to confirm that the uptrend will reverse yet on this timeframe. However, I wouldn't be surprised to see a retest of the prior day's high at some point.


Chart #5
  • Each candle represents a Four-Hour period.
  • This timeframe simply shows the steep rise that has been made since the June lows.
  • There is no confirmed candle reversal signal yet on this timeframe...only a pause.
  • The upper Bollinger Bands are still expanding on the Dow & Trans, while the Utils' BB has hooked down slightly.
  • Both the MACD's & Stoch's are within their overbought levels and the MACD histogram is contracting to the downside...starting from June 22, there is a negative divergence on the MACD histogram on the Trans.
  • There is nothing to confirm that the uptrend will reverse yet on this timeframe. However, I wouldn't be surprised to see a retest of the prior day's high at some point. A candle close and hold below the low of last Wednesday could signal trouble ahead (with Cummulative TICK confirmation as mentioned in my post last Friday)...and a potential reversal, especially if selling enters the market with conviction.


Chart #6
  • Each candle represents a One-Hour period.
  • This timeframe also shows the steep rise that has been made since the June lows.
  • As of the end of Friday, there is no confirmed candle reversal signal yet on this timeframe...however, the Utils did retest Wednesday's low (and rising 50sma) and bounced.
  • The upper Bollinger Bands have hooked down slightly.
  • The MACD's and histograms are declining with no confirmation of a reversal to the upside.
  • The Stoch's have hooked up after falling into oversold territory on Friday.
  • Other than declining momentum, there is nothing to confirm that the uptrend will reverse yet on this timeframe. However, I wouldn't be surprised to see a retest of the prior day's high at some point. A candle close and hold below the low of last Wednesday could signal trouble ahead (with Cummulative TICK confirmation as mentioned in my post last Friday)...and a potential reversal, especially if selling enters the market with conviction.


Conclusions:  Unless buying momentum picks up on the One-Hour and Four-Hour timeframes this coming week, we may see some whippy range-trading (in between the upper BB and the rising 50sma (red) on the One-Hour chart and possibly down to the PP of the prior week) until either the uptrend continues, or a pullback begins below last Wednesday's low to some degree. As a daytrader, I would drill down to lower timeframes to look for similar clues and a variety of confirmations, while taking into consideration market internals and events as they unfold throughout the day.