DJIA 3/11/08 TECHNICAL ANALYSIS

MARKET BREADTH (NYSE)
Net adv/dec issues: +2,222
Net new highs/lows: -144
Net up/down volume: -173,647,807

TECHNICALS
Major consolidation, Intermediate downtrend, Short term downtrend
Immediate Support: 11,600 Resistance: 12,800

OUTLOOK
Yesterday we said that we can expect a bounce around the 11,600 reaction low. Well, after 7 days of decline out of the past 8 trading days, it is not surprising to see a bounce occur today at the 11,740 level. The magnitude of the bounce which is huge - CNBC's Tyler Matheson calls this the biggest one day advance in five years - gets a lot of people excited and for good reason. But before we get ahead of ourselves and prematurely conclude that this is the start of a market uptrend, let's pull up the chart. So far what we have is a bounce, albeit a big one, off the prior reaction low. We also see that this bounce is happening within the context of a bigger intermediate downtrend and coming from a prior 8 day declining shortswing. Taking in all of these, what we have is a break of the short term trendline that could likely be the start of a fresh upswing. I apologize for raining on this parade, but so far (and I mean just that - so far or at this point), that could be all there is to it, a technical correction. A trend is valid until proven otherwise, so it is reasonable to expect this upswing to be challenged by selling pressure near the intermediate trendline resistance. Sure, this bounce could be the the start of a reversal, an uptrend even, but there just aren't enough technical evidence as of yet to conclude that they are likely. For me to consider that such a process is under way, i will be looking for a valid break of the intermediate downtrend line followed by a breach of the 12,800 resistance. If that happens, I will be seriously reassessing my market sentiment.