The Dow closed below 8,000 but is still above the low set on 10/10.
It should be no surprise that the lows are being tested - in my previous posts on "Tracking the Dow chart" I noted the path of least resistance has always been down. This is the third attempt on 8,000, with the second attempt on 11/13 (last Thursday) providing a nice bounce and an outstanding trading opportunity.
Not to sound like a broken record, but I try not to make predictions. I trade the setups that appear, long or short. I mentioned before that a break of the 10/10 low presents a bearish scenario that could ultimately take us to sub-7,000 levels. Kernan from TRADEthemove.com contributed some thoughts on support if that low is broke.
The bottom-line is we are nearing a critical point - will the market bounce and sustain a rally, or are the "buy and hold" investors about to feel more pain than they thought possible?
On the trading front, the NQ Futures followed textbook action yesterday as price broke through the 50% retracement and pulled back for a nice short setup. Price declined to the previous day's low, chopped around a bit, and then continued to the Fibonacci extension (FE).
I entered a short on the "hanging-man" candle (as indicated by the arrow) and covered at the end of the day when price hit the FE.