Dow Breaks Support as Oil Rises

DJIA - 131.24, -1.08% SP500 - 13.12, -0.97% NASDAQ Comp. - 28.02, -1.14% Russell 2000 - 5.86, -0.80% Oil closed at $136.68 up $2.67 The markets headed lower at the open, rallied a couple of times during the day and closed near their lows for the day. Decliners once again led advancers by a large margin 2,254 to 853 on the NYSE and 2,054 to 801 on the Nasdaq. Oil headed lower in early trading and at mid-day rallied and closed up almost 2% for the day. Oil is currently forming a pennant pattern, which is a short-term continuation pattern, which has been forming since June 6.

For the second day in a row the DJIA was down more than 100 points. Wednesday was a continuation of the bear flag break on Tuesday. The DJIA closed below the 12,083 support level set on June 11. Today’s support break creates a price target of 11,836. The S&P continued with a significant move below its bear flag pattern which it slightly penetrated on Tuesday. The S&P stayed above the 1,331 support low hit on June 12. Should the S&P break below the 1,331 support the S&P price target will be 1,296. The Nasdaq broke it bear flag formation which now completes both a lower low and lower high coming off its recent double top. The index returned to the May 23 horizontal support level of 2,430, the low between the double top. The first break on June 11 rebounded to the lower high yesterday. A successful break at would generate a price target of 2.310 on the index. The Russell (RUT) also broke out of a bear flag to the downside on Wednesday which is a lower high for the small-cap index. The recent high can be viewed as the right shoulder of a head and shoulders top pattern. The RUT did find support at its 50 DMA and rebounded from its intra-day low.

Rail stocks which formed a falling 3 methods pattern over the past five days rallied from support today: NSC sold off from its high forming a spinning top at support. BNI sold off at the resistance of the 50 DMA. UNP the strongest of these rails today formed a piercing line pattern. CSX also strong formed a white candle with an upper shadow equal to the body and closed above its 50 DMA. CNI closed down for the day at horizontal support. Coal stocks CNX, MEE, BTU and coal ETF KOL moved higher on the rise in oil prices. POT formed a potential hanging man candle. If confirmed tomorrow, this would be a counter-trend move. MOS formed a potential hanging man candle which could be the second candle of an evening star pattern if prices move lower tomorrow. CF formed a hanging man candle, also a counter-trend move if confirmed. The stock rallied from the S1 support on Tuesday’s large white candle. AGU formed a dark cloud cover. If confirmed also a counter-trend move. MON pulled back but stayed above the S1 support level of Tuesday’s large white candle. X formed a bullish engulfing pattern just above support. USO rallied on the rise in oil prices on Wednesday. USO is forming a pennant since June 6 just like oil. FSLR broke the low of the high day in its recent 5-day up trend. JASO which rallied from it low of the day formed a lower high but lower low and closed above the low of the high day. Today’s Action Moving Up: CNX, X, MEE, SCHN, BTU, PCLN, GS, RIMM, USO, SOHU, CLF, MA, IPI Moving Down: FSLR, AAPL, POT, ESRX, MON, MTL, DRYS, FWLT, AGU, IBM, V, BRCM Intermediate Term Market Trend: Down (DJIA, S&P) Short Term Market Trend: Down