Wang’s Happy Trading

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This weekend, in my Market Forecast, I wrote,
“The big thing to watch this week is the 10-day MA (red line) on major indices.  If the 10-day MAs curve down, it could signal further slide in the markets.”

What did I mean by that?  Let’s take a look at today’s charts:
SPX

A lot of times when the market goes into a trend (needless to say, presently, it is a down trend), it goes in steps.  It rides the bollinger band (either down or up, depending on the trend) for a while; then, we see it trade in a range, which results in the 10-day MA flattening out.  If the trend were to continue, we see the 10-day MA curving (either up or down) to signal a possible new leg.

Looking at the SPX daily chart, we see that in the present down trend, the 1st leg started around Sept 8-9, when the daily MAs went into a new bearish formation (10- below 20- below 30-day MA).  SPX rode the daily lower BB (bollinger band) down for about 2 weeks and attempted to bounce, but, the 30-day MA served as a strong resistance.  The first range started to form and the 10-day MA flattened. 

In the beginning of October, the support at 1200 was broken, and the 10-day MA curved lower, signalling a new leg down.  SPX again rode the daily lower BB down until 10/10 when 900 was tested.  We saw a bounce.  But, this time the market was weaker and could not even hold above the 10-day MA.  We saw the second range form and the 10-day MA again flattened last week. 

Now, that 900 level is broken and the 10-day MA is curving down again!  Today, the market tried to move up in the morning, but, could not get above SPX 890.  In the afternoon, we saw more selling, again.  SPX closed down 27.89 points at 848.92. 

Nasdaq is showing similar patterns:

Nasdaq fell 46.13 points to close at 1505.9.  It closed just above the 1500 level.  The 10-day MA and MACD curved lower.

We can see this “stepping-down” pattern in many individual stocks also:
FSLR

FSLR’s nearest support is at $100.

RIMM

RIMM’s nearest support is at $40.  After that $30 is the next strong support.

GOOG

GOOG’s nearest support is at $300, set back in 2005.

So, of course, the question is “How low is the market going to go?!?”.  Most people seem to have agreed that the market is oversold, but, people have been saying that for at least a couple of weeks!  And still, there are no buyers!  SPX’s next support level is at 800, which is pretty much the 2002 low.  With this new “curve down” in the 10-day MAs, the market is very vulnerable.  It will need a big, substantial rally to overturn the 10-day MA.  I think we’re going to see more downsides ahead of Fed’s announcement on interest rates (Wednesday).  Right now, there’s no need to jump into the market in a hurry, as the technicals are still very weak.  But, that’s perhaps what big, “sidelined” funds are looking at; and thus, we don’t see buyers!  Not yet!

Good night and HappyTrading! ™