Today is Thursday January 21st and it finally happened, breaking the “Rising Wedge” on the Dow and S&P Index.

This has been in the works, building up pressure for some time and today something sent the major averages south for the winter. I popped on an internet news source and I think Obama plans to tighten regulations on banks and their investment practices. Banks don’t like being told what they can and can’t do, when it comes to investments, but that may be the case? I just saw the headlines.

The point is, what ever tipped the market, it happened. I would like to be optimistic, but when I see a pattern like this and a break like today with the market closing at the lows of the day, investors should be concerned. With day traders like myself, it does not really matter, we welcome the increased volatility, it is long overdue.

We are coming off the highs just two days ago and getting pinched between two trading ranges, that were getting smaller and smaller as time went by. That is why the movement has been so shallow. I think that has now changed and if nothing else, you will see a lot more swings and tradable moves going forward.

I can see the market trading lower to the next pivot low of around 10250 and possibly trying to rally. That would be normal, as there seems to be support at those levels. A short rally off that price will give you the next clue. What ever happens from there, will begin the next chapter.

It is very possible that we go back to the middle of the range we just finished making. That is what I would expect if I was looking at a tick chart inside of one day. The stock market is “Fractal” in nature. The patterns it presents and plays out are the same no matter what time frame you are looking at. This to me is just amazing. When I discovered that many years ago, it kind of blew me away.

So, back to the point, we could see a move over the next few months in the Dow to 8600 to 8100 if we get a retracement back to the middle of  the nine month long rally. That represents a 50% and 62% retracement from the March 6th low to the January 19th high, set just two days ago. No one knows the future, that I understand and accept, but I am just stating the possibilities. We will need to see how the market handles the next pivot low.

Investors will be buying the dips, that is for sure. People and the so-called experts will come on TV and tell America that what you wanted to buy a couple of days ago, just went on sale and everyone likes a good sale, right. Well, I can’t tell anyone what to do, but  I am not buying now for any long-term investments myself.

This is another area, where traders and investors get in trouble. I know there is no guarantee and the market can do what ever it wants when ever it wants to, but the odds favor a decline. If nothing else, this is a good time to lock in profits, but Greed many times will sneak in and tell us, it will go back up, it has too. Says who. Wishful thinking will not move the markets and Greed will more often hurt you bad and leave you for dead.

I was going to put off talking about Fear & Greed for a day or so, after the dust settles on this recent move.

In my trading I did well early on and stopped with about 10 minutes of trading. I did see and mark my chart for the next few trades, including the start of the big drop.

I have a video of the todays trades as well as the signals generated for most of the day following. When watching, keep in mind that you only need a couple of small trades to make really good money, but doing it daily is where the real reward comes in.

 

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Tags: Dow Jones, rising wedge formation, S&P 500