Dow Jones Industrial Average (DIA) rejected at the 18,000-18,075 resistance level cited yesterday. In the report, we mentioned “we are beginning to reach a cross roads where prices could accelerate higher or provide a little shake out lower prior to another bull run.”
It is too early to tell if US30, a CFD which tracks the DJIA, is simply gathering strength for a punch higher or if this rejection will dig deeper into lower levels.
On the one hand, sentiment as measured through the Speculative Sentiment Index (SSI) suggests a burst higher may happen sooner than later. The SSI reading has dropped from -5.2 yesterday to -6.2 as we write. Long positions have shrunk 14% versus yesterday’s reading.
However, the technical picture allows for a shakeout lower. Therefore, we will let the market dictate to us as we focus on some key levels.
First, the ii-iv channel crosses near 17,880 (red line on chart below). A break below this level does indicate some type of correction is at hand. Above this level we need to keep the door open for a break higher…especially if SSI continues to drop.
If DJIA does break below 17,880, then look for potential support near 17,600 or possibly a retest towards 17,300.
The bigger picture bias continues to be to the bull side and that we are looking to buy dips or buy a breakout higher.
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