The Dow made a mini-crash. Blame it to the oil; blame it to the poor home sales; blame to the credit crunch. There is really not a single event that could cause the drop of yesterday’s market. But how often do you see the analysts or reporters trying very hard to find fault to single event. This time they blamed it to the oil, which surged past $122 per barrel.

Anyway, why don’t we look at the MA-200 resistance of the Dow? Or perhaps the weekly MA-50? Don’t they suggest the possible retracement? But no market commentators really care. But these resistance lines together with the (upper) channel line made a more reasonable explanation than any of the above factors. Furthermore, the technical factors are much more tradable than the fundamental ones. For instance, AIG sent a strong signal to go short yesterday.

We should expect a further pullback from current level of the market or may be stalled around this region. We shall re-analyze the situation when the markets, both Dow and SPX, have reached the oversold area of Slow Stochastics. At this time, we still have to be vigilant for any possible immediate change. The market is chaotic as the daily chart is bullish while the weekly chart is bearish.

Let’s see what will happen later today.

DJIA Daily Chart

The DJIA weekly chart is bearish. This is still a factor that led me to be cautiously bullish

DJIA Weekly Chart

STOCKS TO WATCH:
AIG, LEH.

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