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Dow Watch: Time for a Pullback?


Keep an eye on Semis, Financials, Transports, high-beta names


Editor's Note: The following was posted in real time on our premium Buzz & Banter. It's being shared here for the benefit of the Minyanville community.

Let's take a look at a simplified version of Dow Industrials (I shared a more complex version yesterday. This is the third time since October's carnage that the average has dared to approach the top end of the Bollinger, as opposed to walking the bottom end. And December looked the best, since that was a lateral, higher consolidation - but Financials and Transports left the party too soon.

The chart shows that the Dow, after making those attempts, didn't even pause for a rest at the Mid-Bollinger Band; it simply sliced through it. What we need is a pullback, whenever it comes, to find support at the Mid-Bollinger Band.

Have you seen that action somewhere recently? Here's an excerpt from a USO trade on March 12:

"USO has run into several layers of resistance:

Click to enlarge

The top end of the Bollinger Band (a feat not accomplished since July 2008); downtrend line resistance; lateral trendline resistance; and a 50-day simple moving average (again, something not accomplished since July 2008).

"...This morning, when the 20-dma started acting as a support, it was time to get back in on the long side.

"After all, the entire excerpt on resistance is actually a positive sign for USO, showing that for the first time in many, many months it has displayed any sustainable strength."

As with news, it's not only the resistance, but the reaction to the resistance that's important.

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No positions in stocks mentioned.

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