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The Dow Jones Industrial Average had a very negative session on Tuesday as the market fell to test the 13,400 level. As the day got closer and closer to the end, it appeared that more sellers step into the marketplace. Because of this, we feel that this market may have further weakness and it, and as such are not willing to buy it at this point time.
Conversely, there is a bit of an uptrend line that we need to break below in order to start selling again. We need to see the 13,300 level succumb to the sellers in order to start selling at this point time. Until then, we are certainly paying attention to this market but are not willing to get involved as this move would be countertrend.
The Dow Jones is full of household names that pay dividends, and if they are starting to fail to attract buyers, there is a real chance that all risk assets will fail to attract buyers. Because of this, we think this is a simple case of "risk on, risk off." This has been the pattern that we've seen over the last couple of years as far as stock markets and currency pairs are concerned, and is the reason to think that this has changed.
Because of this, we have to assume that the world is getting nervous about global growth again. That being said, you have companies such as Alcoa and Caterpillar that are represented by the Dow Jones Industrial Average, which of course involves global growth. With that being said, we feel that the stock market in general may be a place to avoid for the short-term while the larger firms reprice global risk.
That being said, we are more than willing to buy supportive candles closer to the 13,300 level, as we see it as massive support. If that level gives way, we then we are willing to start shorting the Dow Jones in the futures markets in an aggressive manner. This would signify a serious break of support, and as such we would have to follow the market in order to take advantage of that break down.