We had seen an initial test of this level on July 17th with a print high at 14022. Over the last six trading sessions the index has only managed to close above this level on two occasions.
With the market in a contraction phase, and an inside bar on Monday’s trading session, this is suggesting that we may be struggling to get above the resistance level. If we are to continue higher then there needs to be a strong thrust to build up a momentum phase.
We noted previously that the dates from October 3rd – 8th may also provide a Fibonacci turning point. As we are yet again at a key time juncture and a key price level, this could be a catalyst for a possible turning point.
My concern is that although October is a seasonally strong month, we are at a price juncture which could head south. On an intermediate term basis, the Dow will need to break below 13690 to confirm a change of trend and on a daily basis we will need to fall below 13947.
If weakness sets in then our levels of support come in at 13703 and a broad target of 13443 – 13487.
The pattern formation also suggests that we are due for a pullback and this may well form a fourth wave at the above support levels before another high takes place.
If the pullback is of a larger degree then one should assume that we have a larger degree top in place. As always, traders should follow the market rather than predict and as we have clear objectives in place, the market will soon declare its direction.
Sandy Jadeja is Chief Market Strategist for ODL Markets and founder of www.Spreadbettingtowin.com where he teaches low risk trading strategies and money management.