Dow Jones and Financials 22-Jul-12

The Dow is stuck in a trading range since the middle of June, based in my Elliot count I’m still favoring shorts but that can change according to the support and resistance levels.

For next week: Closing prices over 12909 with low volatility will be a strong buy signal, below 12524 will put the Dow in short territory, down moves are fast and most of times I only get 50% of the move. Three days below the important 12524 level and I will short it all.  Prices between those two levels are almost sure neutral.

Financials are starting to show low relative strength, preferring the group for shorts if the markets begin going down decisively.

As with the Dow, two important levels are well defined for next week. Below 267 is an open invitation for the shorts to come, above 275 will end the possibilities for shorting but not necessarily will be a long signal. In the middle is a no trade zone.

I rarely trade stocks, limiting my trades in the ETF-ETN universe; anyway here are two trading ideas in the financials group:

BSAC closed above the 78.79 level, I would wait for a close above 80.60 before buying, a well-defined resistance.

AXP is showing weakness, the 55.88 level should not be broken to the upside for the shorts to have an opportunity.

As of last Friday I only have a long position in TLT and no shorts. I bought on July 6; below 128.21 will put my long in jeopardy, above 130ish would signal an upside acceleration.

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Good Luck,

Gold support and resistance

Gold is treading a triangular formation favoring shorts since the beginning of June. Daily speaking, two levels are well defined.

The upside break of the triangle upper line followed by a close above 161.30 for this week will put the odds in bullish side.
155.28 was almost touched today, a close below this line is a short indication but I would like two or three days under before shorting. Gold is nervous and the markets are a little neurotic today at midday, let’s wait for the close this afternoon.

Long term view is also to the short side, old support is at 151, a break above the 4 week upper channel kind of end it for the shorts.

Dow Jones US Oil & Gas Index

Oil & Gas is at an almost exact 84% retracement both in time and price of the Jul 3-Jul 10 move.

 If in fact the group is in down mode we should start seeing lower prices very soon, anyway, this week the group is defining its future trend. 548 is support.

Diverse Markets Update

From May 1 to June 4, Mid Cap traced a perfect 5 waves down, or was it only three waves down?, that’s the thing with those patterns, you recognize them when they are finished. Something like that happened beginning this year, most of us where expecting a change of trend but the market kept going up. Well, that was then and this is now.

If the movement from 530.07 to 462.84 is a 5 wave down, the upward retracement should be ending soon.  Mid Cap presents an almost perfect zig-zag from June 4 to yesterday. Now, I am not expert in Elliot Theory but one would say that a retracement should take less time than the main direction wave.

From May 1 to June 4 we have 35 days, from June 4 to yesterday is an 83% retracement in time, to July 9 there will be 35 days.

Basic Materials weaker.

Financials a little bit stronger.

And then we have the Russell with its 88% retracement in points.

I shorted the Russell at the close yesterday; target is at 1% down, stop at 0.76% up, for a day or two at last.
Good Luck,