The Dow closed week ending February 8th -4.4% lower as it faced resistance at the Fibonacci 12614 â€“ 12707 levels.
Having broken the pivot low of 12250, this triggered a move lower and the Dow is currently resting just below the 50 retracement level to the downside.
We observed that momentum is still to the downside as the Dow failed to inspire a pop higher on the RSI to initiate a short term buy signal. This simply means that we are still in a weak mode until we can have further confirmation to play on the long side.
The next move ahead will be difficult to forecast until we can clear certain objectives this week. Firstly the move lower has not by any means indicated that the decline is yet over. Short term traders will note that technical indicators can remain oversold for longer periods of time and will be rendered useless in current cases.
If the index is to stage a rally from this area then traders need to keep an eye on 12201, 12607 and also 11877 as potential bases. On the other hand, an immediate move higher to complete the upside counter trend rally would need to see the Dow clear above 12400 to attack the 12742 February 1st high. Above that we still have in place 12916 â€“ 12960 as a main resistance target.
Traders have had a field day with recent volatility and with short term moves in both directions who could ask for more? Trend traders have also been rewarded as the swings have been sizeable and we cold be facing further large moves in the coming weeks.