Lower Highs and Lower Lows on Dow Jones Index

Some summer whipsaws are taking place in stock index futures. I was looking at the different indices including S&P500, NASDAQ, mini Russell and last but not least the Dow Jones.

It seems that the Russell is the most bearish one while NASDAQ is the strongest one, which is a topic for another article by itself (Inter market spreads).

I decided to look at the Dow Jones cash for clues of future direction for the equity complex and what I saw I am sharing with you below in the daily chart.

You can clearly see lower highs and lower lows which i circled. What this means is that when the market moves higher it fails to take the previous high and when it moves lower it is able to establish a lower low than the most recent one. In my book as well as many other traders this is a bearish sign.

Based on the last few moves, it seems like we may have a bit more room to the upside before the market faces decision point but I wish trading was that easy or scientific - it is not.

Looking at the chart below, I think the door is open for a larger correction if we can take out 17399 which was the previous low.

My opinion is to try and sell rallies or if you an option trader, perhaps look to sell calls and use the premium to buy puts. If you are not familiar with the risks associated with futures trading and/or options on futures, I recommend you visit our broker assist services and get help creating a trading plan