Thomas Kee StockTraders Daily.com

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Summary of the Technical Analysis for the DOW
(This takes into account the near term, mid term, and longer term charts)

Our combined analysis for Monday is very important.  Aside from our general outlook for Monday and the week ahead, it also provides significant insight to longer term trends.  Pay close attention to the longer term charts.  Our longer term analysis has changed.  The charts now paint a clear picture of the oscillation channel that has developed recently.  With this revision, we are now able to gauge the period transition of the recent increases more accurately.  We are now able to determine the duration of this recovery.  According to our combined analysis, it only has about 25% to go, and that is a deteriorating ratio.  Please read the longer term analysis for more details. 

In addition, and more specific to shorter durations, the markets have developed neutral channels.  When support broke on Friday, we expected this.  Our immediate read tells us that the Market is likely to flounder.  However, a closer look tells us to expect corresponding volatility too.  A break higher or lower, above or below the initial channel, could lead to very aggressive market moves in the direction of the break.  The greater probability continues to suggest higher levels, but downside risk has increased in recent days.  Now, we must respect the risk of a mid term down channel.  Thus far, our combined analysis tells us to continue to expect higher levels if mid term neutral support holds.  Expect the Market to begin the day floundering within a neutral channel on Monday, and then respect both initial support and initial resistance as inflection points.  If either break, expect momentum moves in the direction of the break.  If they hold, expect a reliable back and forth pattern to offer excellent trading opportunities.

Near Term Chart Analysis for the DOW

Our combined near term charts are telling us that the Market has recently tested support.  In addition, the near term chart of the Dow is telling us that the channel is converging.  This is descriptive of the immediate read offered by our combined near term analysis.  It suggests that the Market is likely to increase to test resistance, but that the channels are shrinking, and resistance is likely to be a little lower this time than it was last time.  Afterwards, the oscillation should result in a tighter near term neutral channel.

Near Term Support for the DOW exists at 9245

Near Term Resistance for the DOW exists at 9376

Mid Term Chart Analysis for the DOW

Our combined mid term analysis for Monday tells us that the Market is floundering.  This is the best description for the recent 'almost test' of support.  However, evidenced by a similar pattern on 8.11.09, our combined mid term analysis also tells us that a premature turn higher could be met with a reversal lower too.  If that happens, the mid term neutral channel will be satisfied as the oscillation to support comes full circle.  This would solidify the neutral mid term channel, and add confidence to technical indicators.  Otherwise, we should expect the Market to flounder within established boundaries for the time being.  Our mid term neutral support and resistance lines define those boundaries.

Mid Term Support for the DOW exists at 9215

Mid Term Resistance for the DOW exists at 9430

Longer Term Chart Analysis for the DOW

Our combined longer term analysis has changed.  The current charts paint a very clear picture.  They show us how far the recent recover has come, and they offer insight to how long it still has to go.  Pay very close attention to the longer term down channel resistance lines.  These are important.  Our combined longer term analysis tells us that the Market is in the process of oscillating from support to resistance.  However, most of the cycle is already realized.  Only about 25% of the cycle is left, according to our combined analysis.  In addition, because the longer term charts slope down, resistance lines will also decline over time.  This should be recognized.  As of 8.15.09 there was relative parity, but that can change.  With the neutral trend lines offering catalysts for the strategic plan, our boundaries have been clearly identified by the downward sloping support and resistance lines integral to our longer term charts.  Based on this combined analysis, we should expect the Market to trend higher from current levels, test longer term resistance, and then turn lower again.  Once more, because the slope is down, the decline from resistance to support is likely to be more aggressive than the increase from support to resistance.  This is true because the frequency of the oscillation period is longer as we transition down within a down channel.  IE, over time support gets lower, so it takes longer for support be tested, on average.  In any case, our combined longer term analysis paints a very clear picture.  Institutional investors and buy and hold investors should use this to gauge their future cash positions.  Our combined longer term analysis tells us that the forthcoming test of down channel resistance will be a major inflection point.  If the Market turns lower, it will also be a major sell signal.

Here is the outline I offered a month ago or so; it helps guide everyone in line with my expectations for the next few months:

http://stocktradersdaily.com/2009Strategy/player.html

Strategic Plan (Find links to the Strategic Plan in our Beta Site):

Dow parameters for Strategic Plan:  7191 - 8052 - 9040 - 9749 - 10745

Investment Rate: 
We are long term Bears.  We expect a GREATER DEPRESSION in the next 5 - 10 years.  The Investment Rate explains why.  Find the link in the Main Menu of our Beta Site.

Longer Term Support for the DOW exists at 9040

Longer Term Resistance for the DOW exists at 9749

Thomas H. Kee Jr. is President and CEO of Stock Traders Daily, founder of The Investment Rate, architect of the ATAP Program, and supporter of proactive trading strategies.  His work can be found in Reuters, Barron’s, MarketWatch, and other Financial Media Channels.