Ed Downs: I think we could see a very, very strong rally. Go Long, America! - 500 Beiträge pro Seite

[cash4all]

Updated Friday, 9/14 for Monday`s Market

Key DOW Levels for 9/17
UP At the Open
DN Not Applicable

Special Report
Rally anticipated as Nasdaq approaches bottom formation and
intense nationalism surges.

This edition of SignalWatch is perhaps the most challenging
of any I have written over the last three years of daily
publishing. What does one say about the market in the wake
of the events of this week?

As you know, I am a technician. I believe in chart
patterns. And, I think we have seen strong evidence over
these past three years that these techniques work. Markets
react at key support levels, and tend to honor such things
as trend line breaks and fibonacci retracements.
Therefore, each day at about 5pm Central, I look at the
charts and assess the probability of an up market or down
market based on what I call "fulcrums" or "lines in the
sand" in the charts. Since technical analysis is based on
psychology, the most obvious conclusion one would draw from
a devastating attack on the financial center of the world,
is that the market is going to go down. However, from
everything I have seen this week, it would appear that
Americans and the World have drawn their own "line in the
sand."

I have included some special pages I would like you to
review, below this introduction. These pages come from
subscribers and folks who have passed emails along this
week. While I think I`m pretty good at reading the Dow,
you are going to have to be the judge this time. What I am
seeing is a very strong attitude on the part of both
Americans and our neighbors around the World - an attitude
to "fight back" against terrorism by going Long next week.
Because of this, I think we could see a very, very strong
rally.

Now, I could certainly be wrong on this. And, I have
outlined some conservative approaches in my commentary,
below. But here`s what I`m going to do: No matter what
the Open looks like, we are going Long on this page. I
don`t care if it`s down 100, 200, or 500. I will be Long,
profesionally AND personally. Why? Because I feel the
same as every one else. There is no way I would short a
stock on Monday. Now, there is nothing wrong with going
Short. It`s an important part of trading. But it just
doesn`t feel right. It`s a negative response. I can`t do
it. And, I don`t think most other Americans can either.
We`re all mad and we want to fight back.

Please read the following articles. We are proud of our
customers, proud to be Americans, and proud of our glorious
free world markets - and the freedom to trade them. God
bless all of you.

Ed Downs

<hr>
* Go Long, America
<p>* A Letter to Terrorists
<p>* America, the Good Neighbor
<p>* Letters from the World to SignalWatch
<hr>

Prior commentary, "...In the Medium Term, we are still
Short on the move below 9,875 giving us about 275 points of
paper profit. I am going to tighten stops down again to
9,675 to lock in 200, because I am expecting an upside move
(I may be wrong, but that is how it looks to me for the
reasons noted above). If we rally through this level, I
don`t think we are going to see a `tanking` market on the
flip side..."

On Monday`s 15 Minute Chart, you can see the obvious "Drop
and Pop" in the first 30 minutes, leading to a rally all
the way up to 9,671 - just 4 points shy of our stop level.
We turned back down to consolidate at the 9,600 level.
Based on the 30 Minute Rule and our Higher High rule, we
did not go Short, but rather stood aside all day, watching
the market spring back and forth in the 9,500 to 9,675
range.

We formed upside saucer patterns on the NASDAQ and OEX. We
have been speculating that there is probably a bottom on
the high tech index, and now all three indexes appear to be
posturing for an upside break, which is the way I would bet
for Monday.

Since we are, technically, consolidating at the lows, there
was the chance for a failure at 9,500. I stand by my
analysis from Friday, with the adjustment for today`s low.
Watch 9,700 for a solid break indication up, and 9,500
down. On the downside, I would stand aside until the
market firms. As I indicated in my introduction, I am
going Long on this page no matter what the Open does, for
the reasons stated.

Short Term Dow

In the Short Term, we want to watch the tight range from
9,560 to 9,625. This range is an expanding triangle in the
5 Minute Chart - an unstable formation. If we drop hard,
we could go to 9,500 where a bottom should form. If we
break 9,675 right away, I`d expect last Monday`s high to
quickly be taken out.

Medium Term Dow

In the Medium Term, we are still officially Short on the
move below 9,875 giving us about 275 points of paper
profit. We came very close to getting stopped out last
Monday at our 9,675 stop level (hitting 9,671 intraday) and
so are still Short on the page. I am going to tighten our
stop down to 9,625 which I am sure will take us out of this
position and lock 250 points of profit on our Short trade.
As I posted on Monday, September 10, I felt the market was
going to rally for technical reasons. Now, I think it`s
going to rally for patriotic reasons.

My goal on this page is not to "predict" the market. I
don`t think anybody can do that with any degree of
certainty. But, in this case, with evidence of strength on
the NASDAQ and OEX, both at historical lows, plus the
prevailing sentiment in this country and the world, I
think it is prudent to take our large Short profit and
immediately go Long. If you want to stay conservative,
wait for 9,700 to be crossed, because that is the upper
fulcrum in the 15 Minute Chart. Cover Shorts at 9,625 and
go Long at 9,700 with stops at 9,675.

NASDAQ Composite and OEX (S&P 100)

The NASDAQ formed a saucer in the 15 Minute Chart, but also
shows us an expanding triangle, along with the OEX. So, we
will be watching for instability at the Open on these
indexes, with the expectation of a rally developing within
an hour of the Open. *

Summary

We are still Short based on our prior position from last
week, and now tightening our Stops down to a point where we
will almost assuredly be taken out at the Open for a 250
point gain from our Short entry. I am expecting an up
market, and for the page, we will go Long immediately at
the Open with Stops below any relative low that forms.

How far could such a rally go? Difficult to tell. As I
say, I think nationalism will propel the market up a great
deal, but that is not a "technical" measurement, rather a
psychological observation. If we do NOT rally at the Open,
and fall through 9,500 instead, I would simply stand aside
until the first bottom and higher low forms, and go Long
there. I expect chaos in the first 30 minutes, followed
by an upward acceleration.

Thanks for listening, and good luck in your trading!

Ed Downs
[e-mail]

---------------------
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link on the left side of the page.

*** Our staff is trading candidates daily in real time. We
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service, please send an email to [e-mail] with
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($) "The 7 Chart Patterns that Consistently Make Money", by
Ed Downs, is available in the University section (click
University on the left nav at www.signalwatch.com).

---------------------
(!) Definitions:

Short Term vs. Medium Term: The short term is defined as
1-4 days. Most short term commentary is relevant to day
traders for the following session. The medium term is 1-4
weeks.

Fulcrums: A fulcrum is essentially a "line in the sand" or
"demilitarized zone" in the battle between bulls and bears.
These lines, identified by experience, are equilibrium
points between buyers and sellers, and are usually found in
the centers of consolidations (trading ranges). When price
moves away from a fulcrum, it usually moves quickly and a
great distance.

30 Minute Rule: Do not trade gaps at the Open, in the
direction of the prior day`s trend. If the market gained
the day before, and gaps up, you should avoid that
situation for at least 30 minutes to give the pent-up
demand time to bleed off. Otherwise, you can easily get
caught in a fading market. Conversely, fading markets offer
excellent Short candidate potential.

Higher High Rule: When we establish a fulcrum, watch for
higher highs or lower lows around the level, and do not
enter again in a move away from the fulcrum unless the
recent highest high or lowest low has been broken. By doing
this, we are able to avoid multiple whipsaws -- UNLESS
there is an expanding triangle - a rare occurrence.

[Infidel]

Excellent Post!

Ed Downs ist der Gruender von NIRVANA, die Firma welche das Stockmarket Charting Program OMNITRADER produziert.

Ich folge seinen Kommentaren regelmaessig und bin immer wieder erstaunt ueber seine Diskussionen ueber Trendlines, Resistance and Support etc.

Hier ist seine Website nochmal, geht leicht im Gedraenge verloren:

http://www.signalwatch.com/

Die Analyse des DOW ist kostenlos, fuer den NASDAQ und S&P (Standard and Pitiful... aeh Standard and Poor) muss man abbonnieren.

Und da der deutsche Markt sowieso den Yanks folgt sind seine Kommentare sehr hilfreich!

The Infidel

[Vivekhyati]

Hi EdDowns,

I just read your excellent comment and was appreciating very much your power of analysis, discrimination and expression. I fully agree with it.

Here in Germany and also in Japan it becomes more and more evident, that someone was speculating against Insurance and Re-Insurance companies B E F O R E the terror attack and I asked: Have most of the investors become clairvoyants or is that the new business of terrorists to finance their "Holy War" with so called "Unholy Money" from the world markets.

We should not become deluded and fall in panic or agony.
Everyone who believes in his future and the future of the world, should take the chance and invest into the stock markets now at low prices at the time of extreme pessimism. That is the best way to respond to terrorism.

I feel that this present war cannot be won in the mountains of Afghanistan, nor in the air, but we can win it on the platform of world economy and stock exchange.

God bless you
Vivekhyati