MARKET COMMENTARY

The Dow finished on Friday with almost 200 points gain. As the market closed with little drawback, it is expected to see a higher Monday close.

The Dow now is beginning to form a Flag pattern - rising parallel lines in a down market. This is continuous pattern and is therefore bearish. However, it is still too early to tell where the market is going without more price actions. At this time, it is crucial to watch these parallel lines as support and resistance - 11400 and 12000 respectively. Breakout to either side will confirm the new market trend. The situation also occurs in the S&P chart.

Do pay close attention to the volumes at all time. So far, the volumes for all indexes are rather tamed. This can be due to the summer lull. Hence, any new chart pattern arising from the market change is dubious without significant increase in volume. You may not want to bet on those patterns during a range trading situation.

At this juncture, I would prefer to stay aside and watch for solid signals before making next trading decision. The best bet is sideways strategies such as Iron Condor and Butterfly for options traders.

DJIA Daily Chart

The Russell is expected to move higher on Monday. But the gain may not be sustainable. Watch the support and resistance. The immediate support is 710 and the stronger support is 698.

RUT Daily Chart

Watch the support and resistance marked on this chart. These are the determinants of the new market trend. With the declining volume, it is hard to believe that it will break the resistance. I would instead expect a double top formation to occur some time this week.

NDX Daily Chart

STOCKS TO WATCH:

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