Second Largest DJIA Point Gain In History...And From Support...

DJIA + 889.35, +10.88% SP500 + 91.59, +10.79% NASDAQ Comp. + 143.57, +9.53% Russell 2000 + 34.15, +7.62% Exchange NYSE NASD Advancing 2,741 2,047 Declining 727 888 Oil $62.73 -$0.49 Gold $740.50 -$2.40 $SOX 232.41 +19.84 Strongest Sectors: XLF +15.71%...XLE +15.25%...XLK +13.90% Weakest Sectors: XLV +6.30%...XLP +6.89...XLY +9.78% Sector Watch Up Trending: Sideways: Down Trending: XLP, XLF, XLY, XLV, XLI, XLE, XLU, XLB, XLK Second Largest DJIA Point Gain In History...And From Support...Is that really possible? Does support really have meaning in largest bear market since 1974? While the magnitude of buying can not be predicted from day to day, today's price action is certainly consistent with the price action of the past 13 trading day. The October 10 intra-day low was 7,882.51. Monday’s low was 8,143.59. That is a difference of 261 points. Today we stumbled across a notable newsletter writer that we have known of for approximately two decades. This writer has historically not been a technician but wrote just yesterday on October 27 “the Dow’s Oct. 10 lows have been decisively broken.” I fault no one for their opinion. But I am embarrassed for another individual when they comment beyond their expertise and have compassion for anyone who read their comments and sold out on Monday or Tuesday because of them. Support is not a specific price but an area or zone of support and an intra-day low 261 points above the cited intra-day low is not “decisively broken.” These type of comments mislead readers and can hurt real people financially. Let’s clarify. In an actively traded stock or index the actual low, not the closing low, is the specific area where buyers stepped in and became stronger than sellers. The close is the price those buyers were able to drive the stock or index to by the end of the day. The intra-day low was the epicenter of support. The DJIA has approached or traded in the area of the October 10 low six times; Oct. 16, 22, 23, 24, 27 and today October 28. ALL SIX TIMES buyer have been present and support held. Dave's Insight: There are big money buyers in the 7,882 to 8,143 area of the DJIA. That of course does not mean that this support area can not be broken, however, for the past 13 trading days they have stepped up and become buyers in this area which suggests unless some new and significant negative surprises unfold that they are likely to continue to be buyers in this area of support. On October 10 we posted in this blog “does this finally mark the beginning of the end of down trend?” Since that time we have fairly represented that bottoms can only be identified after it becomes fact, but that price action characteristics of bottoms can identified while a potential bottom is in process of forming. We have also fairly represented those bottoming characteristics that we have seen. Dave’s Insight: Don’t listen to technical insights from individuals who are not technical experts. That said, even with the second biggest daily point gain in history, the technical evidence does not yet support the idea that this basing action is over and a new uptrend is a foregone conclusion. Technically, a higher high than the October 14 high and a higher low above the Monday’s low needs to appear for confirmation of a trend reversal. Interestingly enough the 30 DMA is now at the level of the October 14 high. Also if the price action continues in the range since the October 10 low, volatility which has been flattening for the past 13 trading days should begin to fall more aggressively. All nine sectors moved higher with counter trend support bounces, several of of which have trend reversal characteristics. Oil fell further on Tuesday in the open outcry session which closes at 2:30 ET. In electronic trading after the 2:30 close oil rose $3.19. Airline stocks LCC, UAUA and CAL moved higher with falling oil prices. Leading stocks AMGN, CB and MMM moved higher and TRV formed a hammer with a support bounce off its 20 DMA. Index Commentary The DJIA bounced off support with power forming a bullish engulfing pattern and last Thursday’s bullish harami…closed near its 20 DMA first time since late September…formed a bullish divergence off its potential double bottom. The SPX bounced off support with a bullish engulfing pattern…confirmed last Thursday’s bullish engulfing and Friday’s hammer-like pattern…formed a bullish divergence in the MACD off its potential double bottom. The Nasdaq formed a large white candle that confirmed Friday’s inverted hammer and bullish engulfing pattern…with a bullish divergence in the MACD off a lower low. The RUT forms a bullish engulfing pattern off a lower low while forming a bullish divergence in the MACD. Stock Commentary Look at the Bollinger Band Hook in these Dow stocks: AA, AXP, BA, CVX, DIS, GE, HD, IBM, INTC and KFT...further evidence of a potential end to the down trend. Semiconductors stocks TXN, STM and TSM part of the SOX index were strong again today. Tuesday’s Action Moving Up: BIDU, MON, MA, STRA, SOHU, CF, CLF, AMZN, FLSR, POTS, SINA, NUE, X, PCLN, MOS ANR, AGU, SCHN, ESRX, KBE, HANS, INFY, V, COH, NIHD, FMCN, MER, BUCY, PNRA, KRE, NDAQ,ZION, AEM, BTU, GDX, CNX, MEE, FWLT, MS, GRMN, RF, UAUA, KMT, ONXX, EXPE, BRCM, EBAY, LDK, IPI, Moving Down: DECK Intermediate Term Market Trend: Down Short Term Market Trend: Neutral