Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Dow Jones Industrial Average: Morning Report

  • After the opening gap on Mario Monti, the technocrat, becoming Italy's Prime Minister, the DJIA sold off and closed the gap, a sign of weakness. Gap traders would reverse their positions on that signal, leading to increased selling pressure, as longs are sold and new shorts are established. The gap traders, would then have to cover their shorts, we are seeing some of that right now (a bounce higher). Traders who missed the closing the gap could initiate short positions driving the market lower. We'll find out if the bears are in a selling mood later.  
  • This is a normal healthy correction within a larger move higher. The DJIA futures could sell off to 12,000. The market traded down to the 12,055 level. So we could see another 50 - 80 points of downside today. 
  • We are seemingly bouncing off of a resistance level, "the" resistance level that has kept us trading around the 12,000 level.  
  • The expectation is for the market to breakout above the 12,300 level at some point. Yes, I did just write "expectation", if that expectation doesn't become a reality, traders will be trapped long this market and forced to either cover and/or initiate short positions, panic selling.

The information contained in this paper is based on or derived from information generally available to the public from sources believed to be reliable. No representation or warranty is made or implied that it is accurate or complete. Any opinions expressed in this paper are subject to change without notice. This paper has been prepared solely for information purposes and if so decided, for private circulation and does not constitute any solicitation to buy or sell any instrument, or to engage in any trading strategy.