Most of the stock indexes closes the session today slightly higher, with the Nasdaq leading the way up with almost a 1% gain, while the Dow was off a bit. I’m only including the Dow 30 Diamonds ETF chart today. The trend here is clearly still down. The hammer candle and momentum divergence of four sessions ago indicated the possibility of a bounce, which on a closing basis has happened. The disturbing part of this bounce is the failure, so far, of any session to rally off the open and hold, thus closing higher than the open. There is a very clear down-channel with prices under the regression curve, with that curve rounding down over prices. It has the feel that it wants to try another downturn and retest lower levels. At the moment prices are above the three-day pivot (yellow dot) and momentum (lower sub-graph) is still pointed up. However, it wouldn’t be a big surprise to see a few days of weakness. A successful test of the hollow body of that reversal candle of four days ago would be healthy and could help confirm that the down-move is over. As I said yesterday, if prices accept that area of the tail of that candle, then another more serious down-leg would be indicated. The upper channel line will be minor resistance to the upside, with more serious resistance at the area of the lower error band (the lower dashed line), then the regression curve above that, which would also be the first pivot point to overcome. In other words, there’s lots of overhead resistance. I successful test to the downside would help build a stronger technical picture.
The chart of the QQQQ looks stronger, but a similar scenario could develop there as well. The trend is clearly down there as well, however the bounce has carried through a bit better. Gold is still flat, with Silver accelerating to the downside.