Macro Outlook:
The Dow's new high has evaporated like an orange popsicle on a hot Baltimore sidewalk. Perhaps it's time to look at the true significance of this event.

Tonight, I will examine just why there is a “Dow Industrial Index,” and whether this high is a buy sign or a last chance to sell.

Market Trends:
Looking at different time periods…

“I am getting confused on the Dow. It seems that you now say that the Dow may trade flat for next 12-18 months. Earlier your prediction was Dow by end Oct at around 11,000… Has your thinking changed on this? I am sorry I sound so confused, but I want to know exactly where you guys stand in terms of the direction of the Dow as it hits its high. What are the additional factors that could have the Dow trade higher or lower? Please address this in your next email if you can…” -B.S.

By looking at the daily chart, the Dow's technicals and its indicators, as well as chart formations, show that in the short-term the Blue Chips have a high probability of dropping to 11,000 at the bottom the Dow channel by the end of October or early November.

By looking at the monthly chart, you'll see that the “flat trend” I'm referring to over the long term is between the 50-month moving average (at Dow 10,000) and yesterday's new high. If the Dow falls in the short-term it will stay within that trend for 12 to 18 months… enough for the correction and then a follow-on rise to current values.

The drop to Dow 11,000 is my short-term target… but it's also the bottom of the monthly “flat trend.” It's important as technical analysts to look at all time periods, to see how short-term predictions fit into the big picture.

Trading Tactics:
It's been an odd three days for Wal-Mart Stores Inc. (WMT:NYSE). On Monday, the major retailer lost $1.00 in a disappointing sales forecast.

On Tuesday, it was up $1.00 on the euphoria of the Dow hitting historic highs.

And today, it's back down $1.15 on news that it cut its September same-store sales forecast to 1.3%, down from a previous estimate of 1.8%.

WaveStrength Traders: Hold your WMT puts for more gains!

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