After trading slightly above its upward channel trend line, the Dow Jones has failed to give us a STRONG BUY CONFIRMATION, and has now instead pulled back to give us a SELL SIGNAL. Despite, gaining back about half the losses of the day, I believe the damage has been done, and the door in now open for the Dow Jones to resume its major trend and could pull back as low as 9900-10000. I think seeing the Dow Jones pullback from here and resume its trend is healthier for the market and will allow it to make a more stable and sustainable gain for the longer term. To get a SELL CONFIRMATION, another day of losses tomorrow should be enough. However, the clearest signal would be if the Dow Jones hit a lower high and a lower low. It currently has minor support around 10300 and 10200 from where it bounced back up today, but I don't see it hold up for long. After the 10200 level there is not much more support and it could then easily fall to the 9900-10000 level I've mentioned. A down day tomorrow will also give us a SELL SIGNAL from the Stochastic which is in heavily overbought territory at just over 96 for the signal line. However, I wouldn't be surprised to see the Dow Jones trade slightly upward tomorrow since the market is in a major up trend, and each pull back are now often see as opportunities to get in at cheaper prices. However, I believe the damage has been done and any attempt to recover should fail, this is a common pattern. For now I would avoid taking long positions, and would actually start to close my long positions and cash in your gains if you have some. For my part I did have some of my stop losses triggered for which I obviously took on losses and for another stock I just closed the position rather than wait for its stop loss to be triggered. At this time there is now much more potential of seeing the market move lower in the short term. Based on the last 3-4 pullbacks of this major up trend, the pullbacks durations seem to have lengthen due to the bigger moves that were achieved after each bounces back up. The first two pullbacks lasted about a week, while the last two lasted around 2 weeks. Basically the duration of the pullbacks have been on an increasing trend, and therefore this current potential pullback if it does get confirmed could last 2-3 weeks, but that's just speculation. There is always the possibility of seeing the Dow Jones break the trend and continue even lower, however I highly doubt this. Although I don't see many opportunities for significant gains on the short side, there are still currently more than on the long side, assuming the SELL SIGNAL gets confirmed.
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