The DOW bounced off of the top of the sideways channel and is now poised to move down and retest the bottom of the channel at 10,200.  We are expecting a definitive breakdown out of the channel and to begin testing a series of swing highs and lows that have been put in since August.  However, until the index shows its’ hand, we will sit patiently and just trade the stock where it want to go in the channel.

The SPX made an attempt to break out to the upside last week only to be rejected by several DOJIs and then a Bearish Engulfing pattern on Thursday.  We suspect that the move back inside of the channel will result in a retest of the lower end of the channel at 1084.  If the index breaks down out of the channel, which is what we feel that it will do, the next stop should be 1020-1030.

The COMPQ has been the leader all year and its move the last two weeks in breaking out of the rising wedge to the upside was very impressive.  The index has also encountered several DOJI days and then a very convincing Bearish Engulfing pattern to end the trading for the week, month and year.  Our sense is that the index will move down to test the top trend line of the rising wedge at 2240.

Stay nimble and follow the market.  Trade what you see and define your levels of support and resistance.  Let’s make 2010 a very profitable year!! Robin

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