Skip to main content

Dominoes falling?

Today was a day when the markets started looking like they are ready for a new leg down. Let's take a look at what the charts are saying.

The Russell 2000 fell again today and confirms it is unable to move up and penetrate the resistance embodied by its 200-day moving average.

Today the S&P 500 fell below its 200-day MA for the second time in as many weeks. It is now down about 9.4% from its peak and has gone negative for the year. Back in the beginning of this month, the 20-day MA made a bearish cross-over below its 50-day MA, and the average has been stuck below both of these chart lines ever since.

The Dow also plunged today and ended up sitting right at its 200-day MA. A dismal forecast is developing, with its 20-day MA making a bearish cross-over below its 50-day MA, it could be moving down further. As of today, the Dow is down about 9% from its peak though it is still positive for the year.

That brings us to the NASDAQ. On the basis of strength in technology stocks, the NASDAQ has been under pressure but was not falling as rapidly as the other averages until lately. Today the NASDAQ fell below its 200-day MA for the first time this year and is down about 9% from its peak though it too is still positive for the year.

To sum up, we have all the major averages at or below their 200-day moving averages, a level where many analysts and investors feel the trend becomes bearish. Two of the four are now negative year-to-date. We have just about fulfilled the requirements for a full-fledged correction.

It has been my feeling that we would get to about this level and the market would spend some time backing and filling and then begin to move up again. Now I'm beginning to think we may overshoot and move lower still. The way the market used to move up on every announcement of a new merger or buy-out, the market now seems to move down with every revelation of a hedge fund in trouble or a mortgage lending institution unable to continue in business.

One average after another has rolled over, it's like watching dominoes falling.

Comments

Unknown said…
The market action has certainly been terribly weak. I think we could see several more days like today, but I do think in the long run that corporate profits are strong and the bull will be back.

Aaron
GrowYourFunds.com
I agree. I was not expecting a bear market, just some more weakness for a month or two.

After today's action by the Fed, however, the bull might be back right now.

Popular posts from this blog

Unlock Stock Market Profits - Key #1

This is the first in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. (Click here to read the original post)

There are two basic steps to investing. First, you need to find stocks that seem to have some potential. Then you have to determine whether these stocks are actually good investments. There are many stocks that at first glance look interesting, but further research reveals that there are too many negatives to warrant taking a position.

This first post in the series starts at the beginning: getting good investment ideas.

Key #1: If something special is happening to a stock, it will be reflected in some kind of unusual activity in the markets.

As individual investors, we will never be the first to know; however, unusual activity can be an early sign that allows us to follow the Wall Street professionals and …

Unlock Stock Market Profits - Key #4

This is the fourth article in a series of posts describing 10 tools to help you identify and evaluate good investing ideas. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. (Click here to read the original post)

With this fourth post, we will continue another step along the path of finding stocks that seem to have some potential. The first post in the series discussed how to use unusual activity to identify investing ideas. The second post described how to use stock screeners. The third post described how to use lists of new highs and new lows. This post will focus on identifying social or business trends in order to find investing ideas.

Information on new trends might turn up anywhere. In conversation with friends or business associates, in newspapers or magazines, on TV or though your work. The key is to be aware of trends and how they start, stop or change. We'll start by describing what to lo…

Free stock alerts, Trend Leaders, Bollinger Band Breakouts and Cash Flow Kings for Jan 16, 2009

This post is to announce that the latest list of free stock alerts is up and available at Alert HQ. Each week we scan over 7400 stocks and ETFs looking for fresh BUY and SELL signals. We apply a combination of proprietary and standard technical analysis techniques to identify those stocks that are beginning to move. Our goal is to identify stocks or ETFs that are undergoing reversals, either to the upside or to the downside.

Wait, there's more...

We also use the Alert HQ process to generate more free lists of stocks and ETFs

The first byproduct of the Alert HQ process is the Trend Leaders list, our collection of stocks in strong up-trends. These stocks are registering strong signals using Aroon analysis, DMI and MACD. They are also above their 50-day exponential moving average. This week's list is now available at the TradeRadar site on the Trend Leaders page.

As another byproduct of the Alert HQ process we have generated a list of stocks that have broken either above their upper…