“The INDU is trying to break resistance at 8348. The index has shown me that it wants to go higher as evidenced by a “Tweezer like” candlestick formation on Thursday and Friday. The DOW will have significant difficulty breaking below 7900 and staying there. It is much more likely to go up, but must show us conviction with strong volume. If it breaks resistance at the 8340-8350 level and closes above this mark, the index will likely continue up to test the 8900-9000 area.”
What Happened?
The index closed at 8375 on Wednesday with unconvincing volume. Robin sent the following email to several trading partners on Wednesday:
Jan 28 (3 days ago)
“ I would be a little concerned regarding the gap down from 1/13-1/14. Although it is small , any gaps can be formidable as far as support/resistance. In this case, the gap is resistance. There are also swing lows from 12/12, 12/22 and 12/29. Final thought, yesterdays’ volume was not overwhelming, so there is not yet consensus in this move. Be careful. M, aka Robin”
The DOW then proceeded to drop from the close on Wednesday at 8375 to close on Friday at 8000.
The week in summary:
Monday posted a small gain of 38 points in the DOW as job cuts took center stage. The effect of the deflationary spiral is being felt in Corporate America as the likes of PFE, CAT, HD, and GM announced job cuts.
Tuesday followed through on yesterday’s move to post a 59 point DOW gain, despite poor consumer confidence and home price numbers. As one would expect, when home prices declined, existing home sales rose. A handful of better than expected earnings reports contributed to the days’ positive gain.
Wednesday was all about the “Bad Bank” and hopes of passing the $825 billion stimulus package. The DOW surged over 200 points.
Thursday gave back all of Wednesdays gain and then some as the DOW dropped 226 points. The house passed Obama’s stimulus plan but was overshadowed by continuing corporate job cuts and massive unemployment numbers.
We closed out the worst January on record dropping 8.8% and 776 points on the DOW. GDP was not as bad as expected. PG, normally a safe haven stock in dire economic times, guided poorly for 2009 and was severely thrashed contributing to a DOW loss of 148 points on Friday to close out the week and the month.
Week over week, the DOW fell 77, the SPX was off by 8 and the COMPQ worse by 1. The week was not as bad as one would first assume. The early week gains offset, to a great degree, the declines in the last two trading sessions.
