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Bullishness builds to session's close

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While the bulk of today's gains were found within the first hour after the release of today's ISM Index data, stocks continue to trudge higher as the Dow Industrials (INDU) 8,595 +3.04% builds its gains to 250 points.

The other major market indexes are doing the same with the more "tech heavy" NASDAQ-100 Index (NDX.X) 1,025 +4.2% gaining 41 points on the session with sector strength in the Fiber Optic Index (FOP.X) 48.69 +9.02% extending an earlier 7% gain.

Here's a quick look at both the Dow Industrials point and figure chart along with the daily interval bar chart. We've looked and analyzed both of these charts in our Index Trader's wraps, and currently find "common resistance" at 8,700. This would be the first place right now where I would look for formidable resistance to be found.

While I'm anxious to establish some new bearish trades, today's strong rally into the close will have me not OVERLY anxious to step in front of things right now. We'll have some shorter-term levels of resistance and support from our daily and weekly pivot analysis to look for some type of weakness, and right now, a bear isn't getting it, and should be willing to show some patience into today's close.

Dow Industrials Chart - $50-box scale

The Dow has rallied from the bottom end of Bollinger Band (settings are 21-day, 2-Std. Dev) and have rallied right back near the 8,600 level, where the Dow was pushed lower last week. On the p/f chart, we also see that by extending the "bullish support trend" (blue +) it too may serve near-term resistance. We make these observations now, and near-term look to see if they hold. The more "formidable" resistance I currently look for is the 8,700 level, which would be the bearish resistance trend, combined with upper Bollinger Band (High) on the point and figure chart.

Dow Industrials Bar Chart - Daily Interval

This is the Dow's bar chart, with retracement we have been using. A quick glance shows the Dow back above both its shorter-term 21- day SMA and intermediate-term 50-day SMA. Technicals a bearish trader isn't OVERLY eager to short/put at this point. However, the "commonality" perhaps with the 80.9% retracement of 8,717 and the 8,700 levels noted in the p/f chart become levels where further bullishness may carry the Dow.

The still trending lower MACD, which is BELOW the zero level is still rather negative from this oscillator. Currently, I'd look for some type of break back below the 8,500 to signal a Dow that could see Friday's lows tested again, if not taken out to the downside. However, if that's a trader's target, then assessing risk/reward from 8,700 to 8,250 currently leaves a trade at 8,591 as a 50/50 proposition and not that compelling, from either the bullish or bearish side of things.

Jeff Bailey

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