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Dow Industrials achieve bearish count at 9,300

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This morning's low trade in the Dow Industrials (INDU) at 9,260.99 was enough to have the Dow Industrials achieving its bearish vertical count from its point and figure chart, which should have traders checking risk/reward in any bearish trades they currently hold. Making sure that current risk/reward in the trades remain favorable enough to warrant continued holding on a near-term basis. While stocks, sectors, and major market averages can exceed bearish counts, risk/reward must constantly be monitored as it relates to a trader's account management.

Dow Industrials Chart - Daily Interval

The Dow Industrials (INDU) have recovered from their worst levels of the session, most likely from some bears locking in gains for some stocks where trades were correlated against the bearish count of 9,300 or 50% conventional retracement shown above.

The Treasury bond market hasn't seen any type of selling this morning and YIELDS remain pegged near their session lows, hinting the near-term recovery in the Dow Industrials (INDU) and some of the other broader market averages is most likely bears locking in some gains.

10-year Treasury YIELD Chart ($TNX.X) - Daily Interval

While I've suggested that bears lock in some gains on stocks that have fallen too far from a resistance level, I think it is too soon for bulls to be stepping in and doing any aggressive buying. The bond market still looks defensive and we really haven't seen much selling in the benchmark 10-year YIELD.

One group of stocks that is very economically sensitive that is seeing some near-term bullishness today is the Dow Jones U.S. Home Construction Index (DJUSHB) 351.81 +1.33%, most likely on the perception that the recent declines in the 10-year YIELD and 30-year YIELD ($TYX.X) have mortgage rates declining.

Aquila (NYSE:ILA) $10.86 -11.3% Update

Earlier today at OptionInvestor.com, I suggested that traders short/put this energy stock from past profile lock in some gains on today's weakness. The stock did fall to the $9.80 level at a session low, but I felt that bears should pay themselves for the risk taken near the $14 level when originally profiled on today's action. I had also mentioned this stock as bearish on premierinvestor.net and subscribers there should be alert to at least lock in 1/2 of any open positions. As it stands now, I'm assessing risk to $13.25, but would need a break below the $9.60 level (from adjusted retracement) to see further weakness.

Jeff Bailey
Senior Market Technician
Option Investor

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