My pattern and momentum work on the 4-hour Dow Diamonds (AMEX: DIA) price action off of the July 15 low argues that the upleg from the 108.33 low to the 115.65 high (7/21) represents the initial recovery rally leg, and that the weakness into today's low at 113.80 represents a shallow correction of that initial upleg.

If my work proves accurate, then current "strength" that is pushing up against the 115.00-115.65 area is the start of a secondary -- and possibly very potent -- upmove that will thrust above the May-July resistance line at 115.50/60 and accelerate to the upside to 117.50 next. At this juncture only a decline that breaks 113.10 will wreck the developing countertrend rally technical set-up.

By Mike Paulenoff

Mike Paulenoff is author of the MPTrader.com (www.mptrader.com) , a real-time diary of Mike Paulenoff's trading ideas and technical chart analysis of Exchange Traded Funds (ETFs) that track equity indices, metals, energy commodities, currencies, Treasuries, and other markets. It is for traders with a 3-30 day time horizon, who use the service for guidance on both specific trades as well as general market direction

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