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Crucial support levels for $INDU

The head and shoulder pattern I mentioned earlier has now been completed.   Today the Dow Jones Industrial Avg closed at 9870.  Some significant points to note are: 

1) The DOW has now closed below 10,000 again.
2) We are now resting at the neckline of the head and shoulder pattern (weekly charts).  A break below here could signal a significant move to the downside.  If the market finds support at this level, we could see a nice upside move.
3)  An upside down cup and handle formation is now complete (Daily charts).  A break downward through this level can be extremely bearish.  On the other hand, if the market finds support here, we could then work on an upside move and form a double bottomed cup pattern. 

I cannot stress enough that we are at a crucial juncture in the market.  I have noticed in the past that generally the market will drop thru a support level to trigger stop loss orders (since they are generally set slightly below the support levels).  Whether or not buyers step in later will determine if we get a turning point and whether the support holds.  The safe thing to do now is to remain on the sidelines for now and let the market sort things out.

If you remember, in my May 25th post I presented two scenarios for the pull back.  A $INDU of around 9427 or 8308 (rough estimates).  Looks like we might be getting close to testing the first of those levels soon. If the market does drop to that level then bounces back, the next level to watch will be the 9870 level to see if the market can break to the upside thru the neckline or get rejected at that level (which then makes a test of 8900 likely and then 8308 possible).

Good luck in your trading and keep your capital safe.

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Disclosure: Mostly in cash

Disclosure: I am mostly in a cash position, waiting to enter the market when the opportunity presents itself