Wednesday, May 7, 2008

Not a Ton of Damage to Individual Charts, China Breaking Down

Here are the charts of the major indices. Although today certainly wasn't good for the bears, the technical damage was not major, at least as of now. The Nasdaq still looks strongest, while the S&P and small caps look weakest of the charts below. The key will be tomorrow. If the S&P can't hold the 1385 area, then this market could break down much further. I can't say the world is about to end just based on today's action, but the chance of this being the start of a move much lower is certainly a possibility.

DOW, S&P 500
NASDAQ, NYSE
Mid Caps, Russell 2000
Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

China got hit in a major way today and unlike the U.S. indices, I don't think there is much doubt this is headed much lower based on the chart below. FXP is the double inverse of the FXI but is a very volatile ETF so be alert.

FXI, FXP
Charts from Telechart2007, Courtesy of Worden Brothers, Inc

I may be a bit early here but I started shorts in FWLT and LEH today based on their charts. FWLT put in a bearish reversal right at its downtrend line on HUGE volume, and if it breaks this lower trendline it is sitting on, I think it will move back down towards $50. LEH is a play on the weakness of the financials - if it heads lower from here, it has a long way to fall. I still can't believe everything is just peachy in these brokers and big banks. Why is the Fed still doing so many different things if this credit crisis was clearly behind us?

FWLT, LEH
Charts from Telechart2007, Courtesy of Worden Brothers, Inc

Here are some of the charts I saw that did start breaking down today. I did not see a ton of shorts I liked in my scans tonight - I assume that means the market isn't quite sure what it wants to do yet. If we do follow-through to the downside tomorrow or Friday, I may just decide to play the inverse ETF's instead of individual shorts.

UBS, AIG, C, AMZN
Charts from Telechart2007, Courtesy of Worden Brothers, Inc

Even though I was stopped out of most positions, mainly because I kept my stop loss levels tight with the market being overbought, there weren't a lot of massacres in individual charts in my scans. Some of the ones I posted last night are still resting nicely and consolidating recent gains. I don't feel like taking the risk of any new longs until I see what happens tomorrow or Friday. Today makes it seem like the odds favor a move lower, but this market likes to surprise us, so stay alert. Best of luck tomorrow.


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