The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.
Two days later the index bounced from a low of 15,341, fulfilling this short-term downside objective, and has since continued higher. My short recommendation remains in place, however.
In my last update I suggested adding to short positions if the index rallied back to my key resistance level at 16,175. Indeed, last Friday’s intraday high was recorded at precisely 16,175, providing another opportunity to sell the index short. To confirm a more aggressive correction than that already seen, however, the Dow now needs to fall beneath 15,551. To do so would open the door for a further decline to within a 119-point support band at 14,395-14,514. A 12.5% correction from the recent all-time high would also be completed at that point.
In the event that 16,175 is sustainably breached on the upside, today I will introduce stop-losses on recommended short positions. The obvious tolerance for any overshoot should be up to the point of the recent high. This high can be seen on the chart by the line representing a 12.5% rise from last October’s minor low, and resides at 16,558.
Recommendation: sell or stay short. Target 14,515. Stop-losses can be applied and activated on momentum above 16,558.