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Industrials have shot at 8,900 by close

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The major indexes continue to hover near their session highs and intra-day technicals begin to look very similar to yesterday's late morning action, with a slight difference being seen in the Dow Industrials (INDU) 8,844 +1.52% as it relates to yesterday's trade.

Is an end of May 8,900 close in the making for the Dow Industrials? We will see but I think a break above yesterday's high gives a high odds probability that the Dow can indeed see an 8,900 close to end the month of May.

Dow Industrials Chart - 5-minute intervals

In today's market monitor, we've noted how the major indexes have once again come to a standstill similar to yesterday. We should start seeing the lunchtime crowd start returning to the floor and trading desks just prior to the 01:00 PM EST mark, an intra-day chart of the Dow that I had drawn up earlier has seen a sight break above an intra-day downward trend, which is ever so slight DIVERGENCE from yesterday's similar intra-day downward trend.

It's "perplexing" to me why this 8,862 level presents resistance in yesterday's trade. Sure, it makes "sense" today as we have yesterday's high to contend with and after seeing a rather decent round of selling, bulls may be hesitant here to push the Dow higher. Almost as if one bull looks at the other and says, "I'm waiting for the break before I get on board or add to my position."

I (Jeff Bailey) think the Dow has a very good shot at the 8,900 level by session's end as traders may also look to play some historical bullish tendency as it relates to the Stock Trader's Almanac noting that the first trading day of June (Monday) has seen the Dow trade bullish in 9 of the last 12 years.

One reason I've been a little more "intra-day" level focused in today's market monitor is that at the close of today's trade, we will then recalculate our MONTHLY pivot analysis levels.

One thing I did earlier today was punch in the monthly high/low for the S&P 500 Index (SPX.X) 962.90 +1.39% and just used the current trade at the time (962.43) as a closing value to get some monthly pivot levels for June. They were... S2= 881.46, S1= 922, Pivot= 943, R1= 984, R2= 1005. Again, these are "guesstimates" as I don't "know" what today's close is for sure.

One thing I've been hearing on CNBC with some interviews from floor traders is their observation that 950 is a "key level" of support for the SPX right now. When I heard this yesterday, I somewhat disagreed and felt that our WEEKLY R1 of 947.6 was the level. Aha!... what's 3-points right? How about that little dip below 950 that now looks like a nice little bull trap?

The "level" that caught my eye in the preliminary MONTHLY level was 943. That's not too far from the 950 level of some floor traders.

My thinking by doing this is that the S&P 500 Bullish % ($BPSPX) is high at 71.6% as of last night's close. I KNOW and YOU KNOW that risk levels are higher now for bullish trades.

As such, I'm trying to find a level where a bull might use to assess the MAXIMUM amount of downside risk for any further bullish trades right now. The MONTHLY pivot for May was never tested this month at SPX 929.9. As such, I think bulls should think like this.

I KNOW risk, as depicted by the 71.6% bullish is has RISK for bullish trades high. Since the SPX did NOT test its MONTHLY Pivot in May, I'm going to assess downside risk today to 943 (on a preliminary basis) when I put on a bullish trade.

Now, I agree that a trader DOES NOT have simply put on a bullish trade and let it perhaps fall to 943 before some type of stop is used, but I just want to try and point out how a MONTHLY pivot can be used, along with past observation of how the SPX traded in May in relation to the pivot, and then combine that information with the HIGHER level of bullish %. On May 1, the SPX bullish % was at 57.8%.

We see how BULLISHNESS has built and internals have strengthened, but at the same time, we are not above the 70% level, which is deemed longer-term overbought.

Can the bullish % go higher? You better believe it can, an current indication are that it will. The narrower NASDAQ-100 Bullish % ($BPNDX) reached the 80% level after yesterday's trade!

Jeff Bailey

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