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Technical Report
by: Jim Ellis, TimeFrameInvestor.com

For the bears, the third time was the "charm".  Once last week, and then again yesterday the price "peeked" below the support of the Oct lows, only to snap right back up.  (Except on the rut, that ended the day yesterday just below the Oct. lows.)  Today the price fell below the support of the Oct lows for the third time.  "should the price breakdown then we will have a downward move underway, and we know that we do not fight against it."  The price fell to the intraday lows from those 2 previous "peeks" below the support, and for part of the day was fighting to hold them as support.  

These intraday lows were just that, a very short term support level, so while there may have been some chance that they could have held again and sent the price back up, that chance was removed with the late afternoon selling that pushed the price to new lows to confirm that a downward move was underway.

This week we are following the DJX in the Red Option Technical Report.

"This creates a growing prospect that the daily charts are forming a bottom and that we could see a new upward move develop.
However, we have the fact that the price has violated the support of the main Oct lows (line on the daily chart), not just once, but twice.  That is a cause for concern, because it shows that the support is not solid.  Then we also have the hourly charts that ended the day with overbought pressure, and the hourly chart is in a downtrend with lower lows and lower highs.  This creates a conflict that creates some higher risk conditions for right now.

We are walking a "tight rope" on these shorter term charts.  There is still a risk/potential that the price could breakdown,"

The price fell below the intraday lows from those 2 "peeks" below the support, and those intraday lows became resistance, which lead to that late afternoon selloff.

On the djx the price began the day trying to remain above the support of the Oct lows, but that was quickly broken for the third time.  The djx hourly chart was fighting to hold just below the Oct lows.  But the price just was not able to overcome the weakness and the fact that the Oct. lows were just not holding as support, and this lead to that late afternoon selloff.  The djx is the "strongest" index as it ended the day very near the intraday lows from last Thursday, but the hourly chart moved below the lows from yesterday, setting a "lower low".

"We are still right on the edge, and there are still valid arguments for both a breakdown and a for the support to hold.  We do not want to let our emotions over ride what the charts and the price is telling us.  So we will continue to monitor the price and charts closely, and should the price breakdown then we will have a downward move underway, and we know that we do not fight against it."

This was quite a fight on the different time frames as the price was trying to create a support level and a bottom on the daily charts.  Even though we had some warnings appear that pointed towards the prospects that the support would hold, we still go with the facts that are shown in the price.  Today the fact is very clear that we have a breakdown, and with this breakdown the charts are showing weakness that confirms the downward move that has developed.

Now the issue is one of managing a shorter term "short" swing trade.  With a new downward move we need to give the price a little time and "wiggle room" to be able to create some follow thru and continue the directional move.  At this time a tight trailing stop would be at the broken support of the Oct lows.  A third move back above that broken support would be quite a turn around.  But at this time, while that would cancel the breakdown we would need to see the price move above the highs from yesterday and today to show that a "hard reversal" is starting to develop which would begin to show an upward potential.

Jim.   www.TimeFrameInvestor.com

Here is a link that explains the different colors and indicators on the charts used in the Technical Report.