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Weaker Dow Industrials weighs on markets

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This morning's trade at 7,700 in the Dow Industrials (INDU) 7,688 -0.21% has the Dow's point and figure chart triggering the "bearish triangle" pattern we had been monitoring for, and this action has seen some slight build to the downside in the Dow and has been dragging on the other indexes, as the Dow continues to show "leadership" skills to the downside.

From here, we will begin monitoring the Dow and its "rate of decline" toward our WEEKLY bearish objective near 7,550. The reason traders and investors will want to monitor the Dow's "rate of decline" is that the "bearish triangle" is a breakdown of consolidation where buyers (demand) and sellers (supply) have been working diligently the past two-weeks and showing GREAT disagreement on future price direction. Should we see a "gradual" decline into the 7,550 level (if ever tested) this would hint that the Dow might be "sold out" and poised for a rebound from this bearish target. One reason a trader/investor even thinks the Dow might be "sold out" is that the Dow's Bullish % ($BPINDU) is below the "oversold" level of 30% at 13.3% and a HIGHER risk level for bearish traders.

Dow Industrials Chart - 50-point box

Today's trade at 7,700 has the Dow giving a double-bottom sell signal, and has the previously monitored "triangle" pattern resolving itself to the downside as supply begins to outstrip demand. I can't say that I'm "surprised" by this action with the buying we've been seeing in Treasuries that past couple of weeks, which most likely "starves" the equity markets of cash.

With the Dow's bullish % at lower levels, it becomes VERY IMPORTANT that bearish traders trade their targets.

I will say this.... should the Dow reverse back higher in the coming days or weeks and trade the 8,000 level, I would consider that quite bullish.

In today's market monitor, I've also been showing the SPX, OEX and NDX point and figure charts. Today's trade at 7,700 in the Dow, now has us looking for "confirming" weakness and sell signals in the S&P 500 Index (SPX.X) 821.95 (unch) at 815 and the S&P 100 Index (OEX.X) 415.82 +0.11% at 410. The NASDAQ-100 Index (NDX.X) 985 +0.21% gave a sell signal on its 25-point box scale chart at 975 on January 31st, but found support at its p/f chart's bullish support trend of 925. As such, first sign of further weakness at this point would be a trade at 925.

Jeff Bailey

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