With the market closed for Martin Luther King holiday on Monday, the Dow Futures were trading over 600 points lower and is set to take the cash index towards a MAJOR KEY SUPPORT level.
Trying to catch a falling knife is dangerous and attempting such a feat is likely to hit deep into trader’s pockets. Paying attention to key support levels is vital for now.
A monthly view of the chart provides us with 11525 as a Fibonacci 38% retracement level from the October 2007 high of 14198 to the October 2002 low of 7197. At the very least this is the first base support level. We also have a 62% Price Projection of the Jan – Oct low coming in at 11385.
Coincidently on a daily time frame, the October high to the November low of 12724 also provides us with a price target of 11395.
It appears that short term traders who view the market as deeply oversold will attempt to buy this market at these levels and may set the stage for a rally.
Adding to the bearish technical picture, we now have a breach of a key reference level on the RSI indicator which turns the intermediate term trend to officially down. Much work is required to turn this market around.
We would need to see a break above 13563 to see higher prices but at the moment this is unlikely for at least a week or two.
If we can stabilize between 11395 – 11525, watch bullish bar setups to indicate a short term turnaround. Below this we have 9871 as a major bear target.
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.