The Dow Futures are falling at this evening and the chart of that is below.
I sent the chart of the Dow below to the Master Trader Market Edge Letter subscribers in our weekend report with and detailed analysis and comments.
Where Are the Markets Headed This Week?
Ideally, as mentioned, the markets will move lower to test the prior swing low.
Once a bullish reversal forms in that area, we will have more trading opportunities and recommendations than we will be able to use.
We had been extremely light on trading recommendations last week — and standing aside while the broader markets went through their gyrations that ended up in about the same place where they started the week — which was the right thing to do.
If by chance Mr. Schizophrenic (broader markets) should trade above last week’s high, rather than move lower first, we would then expect a shortable pattern to materialize.
Since there is always the possibility of some crazy move to occur, the third scenario would be that prices do not reverse after moving to the prior swing low.
Because there is a Void of support below that prior swing low, it opens up the possibility of a 1000-point move lower in the Dow.
At this time, even though that last scenario seems to be the least likely, we always consider the most remote.
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Dow Jones Industrials
Above is the chart of the Dow Jones Industrial Average that we review each week.
Last Monday, the Dow traded inside of the prior Friday’s range from top to bottom. After trading higher that day, it closed near the low of the day.
Tuesday’s gap above Monday’s closing price set up a shock to those that were short overnight, expecting lower prices.
That shock resulted in Tuesday’s more than 500-point move higher — and the sucker rally. Tuesday’s higher low created the Pivot Low (PL) marked above.
Wednesday was a whip up and down day that ended close to where it opened that trading day. A move above its high could have resulted in a move toward the moving averages above — but did not.
Thursday’s prices sold off, taking out the sucker rally day’s low, and Friday was another inside day.
By the end of the week, the up-and-down gyrations ended about where they started with the Dow eking out a 4% gain for the week and a Pivot High (PH) above.
As you can see, I have the Void below the PL boldly marked off. While I move down to the next Major Support (MS) area below is the least likely move to occur, if prices don’t reverse in that area — which could be slightly below the prior PL — that big move lower becomes highly likely. Stay Tuned!
DOW Futures Monday Near Midnight ET
The broader markets are falling at the time of this post.
Will the Dow hold this low and make a W-Bottom or fall into the VOID below?
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Happy trading! If you have any questions or comments, please e-mail Greg Capra at Greg@mastertrader.com or Dan Gibby at Dan@mastertrader.com
All the best,
Greg Capra
Managing Director of Master Trader
Trading the Pristine Method — Origin and End
Dan Gibby
Chief Options Strategist
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