Headed For November Low!

The Dow broke its short term neutral channel to downside today, dropping almost 300 points in a single day and heading straight for the November low. In fact, the November low is a mere 100 points away right now. If that is broken, the intermediate neutral trend would also be broken and we could see a free fall with no more strong support levels in sight.

What happened today? The bulls were totally disappointed as the Empire State Index turned in far worse than expected. The Empire State Index is thought of to be a leading indicator for the ISM index, which is a "leading indicator" for real GDP, and coming in worse than expected would mean that the next ISM index reading next month could still turn in lousy with no stabilization in sight. Yes, investors were looking forward to a higher number this time round like it did last month but it just didn't happen.

On the technical front, the Dow would accumulate a little around the November low before deciding if the intermediate neutral trend is worth holding on to. In fact, it could start as early as tomorrow as such big drops does usually lead to a few days of accumulation on its own. Like I said yesterday, volatility is going to be the name of the game this week. For now, the Dow is still pending confirmation of short term down trend and is still in intermediate neutral trend.