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Dangerous Day for the Dow

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The Dow is down 68 points, and once again getting close to testing support.

Dow Point and Figure Chart

The Dow is currently trading on a buy signal on its point and figure chart, but came within 5 points of giving a sell signal at 10,200 yesterday. The point and figure chart is a good snap shot of the trading range that the Dow has been in between 10,650 and 10,150. If the Dow wants to break out of this range to the upside, it will have to fight through resistance at 10,600 and 10,650, as well as the bearish resistance line at 10,750. The Dow has already broken its bullish support line, and will have to rely on support at 10,250 and 10,150. The Dow is currently 26 points from support, and several of its components are also testing support.

IBM, GE, Kodak, Phillip Morris Point and Figure Charts

If we look at four of the Dow's components (IBM, GE, MO, EK) we can see that they are all sitting right at their bullish support lines. IBM is down 78 cents today, and $1.30 away from breaking its bullish support line. GE is trading at $42.00, and a drop to $41 would crack the line. Kodak is at $43.35, and $42 is the drop needed. Phillip Morris (MO) is in the best shape at $44.76, $2.76 away from its bullish support line. Should these stocks start to lose support, the Dow could very well do the same.

3M, Alcoa, DuPont Point and Figure Charts

If we take a look at some of the Dow's cyclical stocks (MMM, AA, DD) we can see that they have already broken their bullish support lines. If the market anticipates an economic recovery, and cyclical stocks are the first to turn up, these stocks should really be performing better. Of the Dow's 30 stocks, we have 3 that have recently broke bullish support, and 4 getting ready to.

Jeffrey Canavan
Assistant Analyst

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