Watch Dow 8,600

Coming to Resistance

By Bryan Bottarelli
Wednesday, July 15, 2009 12:44 PM EDT
Wed, 15 Jul 2009 16:44:00 GMT

Dear Bottarelli Research Member,

I’m not going to lie. I’m very tempted to short the market rally by adding DXD calls and/or DIA puts. After all, the Dow has gained 380 points over the last three days thanks to a strong earnings report from Goldman Sachs and an “upbeat” outlook from Intel. When I say the word “upbeat,” I mean that Intel posted sequential revenues of $879 million, which was far less than last year’s $1.4 billion. But apparently, Wall Street considers this a grand slam for Intel. Go figure.

In my view, we’re once again being fed a line of hogwash, and investors are taking the bait. As I’ve been warning all along, the major market averages have a tendency to rally right at critical breakdown points. Considering the fact that both the Dow and the S&P 500 were on the verge of confirming their Head and Shoulders formations, it was only logical to think that the powers orchestrating this market over the last few months would attempt to reject the confirmation of the H&S formation by sparking another surprise rally. Well, over the last three days, that mission has certainly been accomplished. But as it stands right now, the Dow is once again approaching the 8,600 level. As you can see below, this level has acted as near-term resistance on two previous occasions. Could today’s rally be the third?

INDU

If I see any weakness going into the close, we’ll jump into the next round of puts. Until then, let’s closely monitor the action. And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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