Tuesday, October 27, 2009

State of the Market - 10/27/09

We had a semi-negative day today on Wall Street, as although the S&P was down only slightly, the Nasdaq had another day of large losses. The market opened basically flat, but from there either moved mostly sideways (the S&P) or moved straight down (the Nasdaq). Volume came in close to yesterday but I do not yet know if we saw another distribution day to add onto the count. Not counting today, the running total for D.D. on the Nasdaq is six in the past four weeks and an astounding nine for the S&P over the past four weeks. Those are typically bearish numbers.

Technically, the S&P held just at its uptrend line and has some support as well below it around 1050 (its 50 day moving average) so I am hesitant to get super bearish yet. It is still very possible we are topping out here, but this market has tricked me too many times this year to be sure about further selling here, at least not before a bounce. The Nasdaq did break its uptrend line and that is significant but it too has support around its 50 day moving average coming into play soon around 2090. The Russell 2000 closed below its 50 day and right at its uptrend line.

S&P 500
Russell 2000

With the McClellan Oscillator as low as it's been since March, it would not surprise me to see a bounce soon. When you factor in that the dollar is up against some resistance as well, a bounce even makes more sense. That is why I am hesistant to get short at this particular moment. Of course, there is going to be one time that IS different than all the rest. There will be a time when the bouncebacks we've seen since March stop happening and the selling really does pick up. I don't know if it will be this time or not - based on my luck this year, it probably will be and I will be out of the market not catching the move lower.

T2106 - McClellan Oscillator
U.S. Dollar
All Charts Courtesy of Telechart and Worden Brothers, Inc.

Basically, I think we are either going to bounce a bit here or really fall over a cliff. With as oversold as we are, a move lower that breaks the technical support we are near would be very significant. If it happens, things will get quite ugly in my opinion. We just have to wait and see if we get that break or not. As I've said in the last few posts and videos, the divergences and bearish signals are there - will the market follow them and will the bears step up to make themselves important again?

My birthday is tomorrow so I will be taking the day off - therefore no post but you can look for the normal market summary Thursday. Best of luck tomorrow and Thursday.


Anonymous said...

Once again, thanks for your analysis. I hope you have a great birthday.

Anonymous said...

happy birthday wishes from belgium.

MW said...

Thanks a lot. Have a great Birthday!

rol lew said...

for all you do...this bud's for you!!!!

happy birthday!!!!.........

positiontrader said...

Happy Birthday Mac! Hope you have a great year ahead....you are one of the good guys.

Mac said...

Thanks guys for the well-wishes.