3SOF

We broke a fairly important daily trendline today, would seem like a small bounce then a real correction is finally coming.  About time actually lol. 

I am holding SPY puts that did quite well today, think I will sell them if I can get just some more downside tomorrow, then consider reloading later.

DOW HITS RESISTANCE.......

After a massive 9 week advance, the Dow ran into resistance with its biggest weekly decline since early March. There is a resistance zone coming into play around 8700-8800 from the falling 40-week moving average and the Oct-Nov consolidation. After establishing support in Oct-Nov, this triangle consolidation now turns into a resistance zone. In addition, notice that 14-week RSI is trading in the 50-60 zone, which acted as resistance in April 2008.

Prior to this week, the Dow was up eight of the last nine weeks and advanced around 2000 points. We do not need a momentum oscillator to figure out that this rally is overbought. With the Dow at resistance and overbought, the odds favor some sort of consolidation or correction. A consolidation would involve a flat trading range over the next few weeks, while a correction would involve a retracement of the March-May advance.

The Dow Hesitates...

Dow Jones Industrial Average
The Dow encountered resistance at 8600, signaled by large volumes, and is now consolidating in a narrow range between 8200 and 8400. Low volume and a narrow range indicate hesitation on the part of both buyers and sellers. Upward breakout would indicate a test of 9000, but breakout below 8200 is equally likely and would test 7800. In the longer term, strong resistance is expected at 9000. Breakout is unlikely and reversal of the recent up-trend would test primary support at 6500. A correction that stops short of 6500, however, would signal a trend change if followed by breakout above 9000.

Dow Industrials...
The Dow is consolidating between 8200 and 8600. Wednesday's large volume and weak close indicate strong resistance at the upper border. Bearish divergence on Twiggs Money Flow (21-Day) signals selling pressure. Breakout below 8200 would end the bear rally of recent months — and warn of a down-swing to test primary support at 6500. Reversal above 8600 is unlikely, and would test primary resistance at 9000.

Stocks fall on inflation, interest-rate jitters
Stocks fall as weak 10-year note auction raises worries about inflation, interest rates
Wednesday June 10, 2009

NEW YORK (AP) -- The stock market has a new priority: interest rates.

Stocks fell moderately Wednesday after the government sold $19 billion in 10-year Treasury notes in a relatively weak auction. There were plenty of bidders, but the government had to lure them in with a higher yield than the market had anticipated.

The yield on the benchmark 10-year Treasury note rose for the fourth time in five days, jumping to 3.95 percent from 3.86 percent late Tuesday. That helped send stocks broadly lower, with the Dow Jones industrial average losing 24 points.

Investors are concerned the government's debt load is growing so large that it will lead to higher inflation and soaring interest rates. Higher interest rates could hamper the economy's recovery by raising borrowing costs for consumers, while inflation could also discourage them from spending.

Stocks have fallen several times in the past two months on worries over interest rates. Yields on long-term Treasury bonds jumped on May 21, sending the stock market sharply lower, after Standard & Poor's warned it might downgrade the British government's AAA debt rating. That touched off fears that the U.S. government's own debt rating might be in downgraded at some point, as some analysts say.

A weakening dollar has also contributed to the concerns about interest rates, since it can lead to higher prices for imported goods, putting pressure on the Federal Reserve to hold inflation in check by raising short-term interest rates.

The dollar's slump has also stirred inflationary worries by driving up prices for key commodities such as oil, which can trigger higher prices everywhere. The price of crude rose above $71 a barrel on Wednesday, its highest level this year.

Jeffrey Frankel, president of Stuart Frankel & Co., said the Treasury auction rattled some traders. But he added that several cautious pullbacks in a stock market that went nearly straight up for three consecutive months are not necessarily a bad thing.

"You have some people reading the history books, thinking, 'This looks familiar to what the books tell us happened during the Great Depression,' " he said. "Then you have others that saying, 'Don't sell America short.'"

The Dow fell 24.04, or 0.3 percent, to 8,739.02 after sliding as much as 123 points after the release of the Treasury auction results in the early afternoon.

The S&P 500 index fell 3.28, or 0.4 percent, to 939.15. The Nasdaq composite index fell 7.05, or 0.4 percent, to 1,853.08.

Data from the Federal Reserve on regional economies did little to help stocks. The central bank reported in what's known as its "Beige Book" that five of 12 U.S. regions said the economy's "downward trend is showing signs of moderating."

The Dow has been waffling around 8,700 this month, just below where it started the year, after its massive three-month rebound from 12-year lows reached in early March.

"We're going to need to have more positive news on the economic front to make another push higher," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.

Bonds weakened as Brazil joined China and Russia in saying it was interested in buying the International Monetary Fund bonds as a way to broaden its holdings beyond the dollar. Brazil's finance minister said it was considering buying $10 billion in IMF bonds. That could mean fewer countries show up at Treasury auctions.

Stephen Wood, chief market strategist for North America at Russell Investments, said inflation is just one of the unknowns as traders try to determine how quickly the economy might recover.

"The market was priced for perfection a year and half ago and you had a market that was priced for Armageddon last September and now you have something priced in between."

In other trading, the Russell 2000 index of smaller companies fell 4.22, or 0.8 percent, to 523.71.

About three stocks fell for every two that rose on the New York Stock Exchange, where volume came to 1.2 billion shares compared with 1.1 billion Tuesday.

Overseas, Japan's Nikkei stock average rose 2.1 percent. Britain's FTSE 100 gained 0.7 percent, Germany's DAX index rose 1.1 percent, and France's CAC-40 rose 0.6 percent.

Dow Jones Industrial Average
The Dow broke downwards from a narrow consolidation between 8600 and 8900, reinforcing the warning on Twiggs Money Flow — where a bearish divergence on the 21-Day indicator indicates selling pressure. Follow-through below 8400 would strengthen the signal. In the longer term, expect a secondary correction to test primary support at 6500.

Dow Faces Key Test At 8200

Fund managers are likely to withdraw support for stocks on their balance sheet now that the June 30 quarter-end has passed. This increases the risk of a significant correction across major markets — which would test the lows from March 2009.

Dow Jones Industrial Average
The Dow threatens to complete a head and shoulders reversal if it breaks through support at 8200. The recent trend channel breakout already warns of a down-swing to test primary support at 6500 — reinforced by Twiggs Money Flow (21-Day) bearish divergence and a peak [R] that respects the zero line from below.

Dow Breaks 8200...

Dow Jones Industrial Average
The Dow broke through support at 8200 to complete a head and shoulders reversal. Confirming earlier warnings, from breakout below the rising trend channel and from bearish divergence on Twiggs Money Flow (both 21-Day and 13-Week), the pattern signals a down-swing to test primary support at 6500.

Dow Jones Industrial Average
The Dow is rallying towards 9000 accompanied by a sharp rise on Twiggs Money Flow (21-Day) signaling buying pressure. Breakout above primary resistance at 9000 is more likely and would confirm the bear trap, indicating a primary advance to 10000. Respect of resistance, however, would warn of another test of 8000. In the long term, there are three scenarios: (1) primary advance to 10000; (2) consolidation between 8000 and 9000; and (3) downward breakout to test primary support at 6500. Direction will be determined by the breakout (or lack thereof).

Dow Averages Signal Bull Market...
Five major indexes have all commenced a primary up-trend, signaling the start of a bull market. A word of caution: the recovery is exceedingly fragile. I will only feel comfortable with the bull signal when the Fed and other central banks start raising interest rates. And that is unlikely to occur for some time — without risking a second contraction. Keep your guard up — and your stops tight.

Dow Jones Industrial Average...
The Dow broke through 9000, exceeding its January high to confirm a primary advance with a target of 10000*. The spike in Twiggs Money Flow (21-Day) indicates abnormal buying pressure.

* Target calculation: 9000 + ( 9000 - 8000 ) = 10000

Dow Theory - Confirmation
Dow split industrial stocks and railroad stocks into two separate averages. His theory requires that movements on one average be confirmed by the other:

•A bull market starts when a bull trend on one average is confirmed by the other average commencing a bull trend.

•A bear market commences when a bear trend on one average is confirmed by the start of a bear trend on the other average.


The Railroad average has declined in significance over the years and the Dow Jones Transport Average is now used in its place.

Example
Dow Jones  Industrial Average is compared to the  Transport Average.


1. The Transport Average fails to confirm the lower High and Low on the Industrial Average. The bull market is intact.

2. The end of the bull market is confirmed by the lower High and Low on the DJTA and a large correction on the DJIA.

3. Higher Highs and Lows on both averages confirms the resumption of the bull market.

Using The S&P 500 As An Alternative
Railroads have declined in importance since the early 1900s when they dominated the stock market. The Transport Average has been expanded to include freight companies such as UPS and Fedex, airlines such as Southwest and Continental, and shipping companies such as OSG. Nevertheless, the index has declined in significance and many traders instead use the broader Standard & Poors 500 index to confirm Dow Industrial signals.

Using the Dow
It is not an infallible system for beating the market ~ Robert Rhea.

The Dow Theory was created as a leading indicator of the business cycle. It should merely be used to indicate the direction of the primary trend — to be followed when trading individual stocks.

Broadening Wedge...

Global markets are more encouraging this week, with India and South Korea signaling new primary advances and major markets rallying in the short/medium term. But the big picture remains bearish. Broadening wedges continue to signal uncertainty. And four of the big five markets remain in a primary down-trend, with only the DAX holding out

USA
Dow Jones Industrial Average
The Dow recovered from last week's scare and is advancing towards the upper border of the broadening wedge formation. Breakout would indicate reversal of the primary down-trend, before it really began. Rising Twiggs Money Flow (21-day) indicates short-term buying pressure. Reversal below the lower border, however, remains as likely and would offer a target of 9000*.
calculation: 10000 - ( 11000 - 10000 ) = 9000

Dow Jones Industrial Average...
The Dow found support at 10000 and rallied sharply on Friday. Expect another test of resistance at 10500. Reversal below the former primary support level at 9900 would indicate a primary downswing, with a target of 8700*. Twiggs Money Flow (21-day) respect of the zero line would be a positive sign suggesting a new uptrend.
Target calculations: 9700 - ( 10700 - 9700 ) = 8700

This is a tough market to make money using a trend-following system. The ranging markets may continue for some time and requires different techniques, using shorter term momentum oscillators.
Reminder:
End of the third quarter is a bearish time of the year, with many major crashes (1929, 1987) occurring in October. We are likely to see further consolidation in September followed by a breach of support. The breach, however, may either resolve into a primary downtrend or rally sharply to complete a bear trap. All we can do is remain vigilant and stick to objective signals

Stocks Rise as Consumers Show Confidence....... 
TODAY'S MARKETS AUGUST 31, 2010, 10:37 A.M. ET


NEW YORK—U.S. stocks erased early losses as a better-than-expected reading of consumer confidence provided some encouragement to investors bracing for slower economic growth.

The Dow Jones Industrial Average rose 35 points, wiping out an early decline, as the consumer-confidence reading raised expectations about future economic activity.

"Housing is continuing to be really weak. The jobs market is the thing the market's most concerned about," said Bill Vaughn, portfolio manager at Evercore Wealth Management. He said the economy still seems to be haltingly improving in a "stair-step" fashion.

"That's a normal pattern whether it's the macro-economy or the market," added.

Heading into the final day of August, key indexes are on track for a month of steep losses. The Dow has shed nearly 4.1% this month, its first down August in five years. This month is on track to be the blue-chip measure's worst August since 2001.

Small-capitalization stocks have taken an even bigger hit this month. The Russell 2000 index of small-cap stocks is on pace to post its worst August performance in 12 years.

The market weathered mixed housing and manufacturing data earlier in the morning. The Standard & Poor's 500-share index rose 0.3% to 1052, and the Nasdaq Composite gained 0.2% to 2123.

The Dow was recently up 0.3% to 10045, boosted by a 1.9% rise in Caterpillar.

However, technology components weakened after technology researcher Gartner cut its 2010 projection for world-wide personal-computer shipments, saying the second half won't be a strong as it previously expected. Intel fell 0.7%, while Cisco Systems eased 0.2%.

Continuing the buzz around recent deal activity, luxury-fashion retailer Saks soared 23%. Saks' climb was fueled by speculation that a private-equity consortium is preparing a cash bid of $1.7 billion, or $11 a share, for the retailer, according to the Daily Mail newspaper, citing unidentified sources. A Saks spokesman couldn't immediately be reached for comment.

Food-processing company H.J. Heinz rose 1% after projecting first-quarter earnings above analysts' recent views as the food-processing company said results again were driven by emerging markets.

Biotech agribusiness company Monsanto dropped 4.6% after predicting its fiscal-year earnings will come in at the low end of its prior view.

Investors fretting over the pace of the economic recovery have been closely focused on the Federal Reserve's assessment of the economy. In the early afternoon, the central bank will release the minutes from the Aug. 10 meeting of the Federal Open Market Committee.

The U.S. dollar weakened against both the euro and the yen. The euro was trading recently at $1.2724, up from $1.2665 late Monday in New York. Demand for Treasury's was mixed, with the two-year note flat and the 10-year note up to push its yield down to 2.51%. Crude-oil prices edged down, while gold futures advanced.