Stock Markets- The Game is Full-On

As I mentioned earlier Dow is facing resistance in the 9420-9450 area and yesterday’s selling took it even farther away. Even relatively positive economic news failed to stop selling and after gapping down market traded in a very tight range. By the close of the day, all the major indexes were near their lows for the day and the losses were widespread and selling was intense. It was a 90% volume down day which means we may see a short term technical rebound.

Though it is too early to conclude anything, there was one thing different about yesterday’s market action.

There was apparently a change in Mr. Market’s character. There were no “buy the dip” buyers in the yesterday’s sell down and there was no “last hour rally” as opposed to recent sell-offs. Market moved within a tight range after the initial gap down. In fact my indicators have triggered a short term “sell signal” but there is nothing normal about this market. We might see a technical rebound following a sell-off yesterday, but an overbought condition suggests that it may have further to decline before bull charges full steam ahead. With yesterday’s decline, the DJI, S&P 500 and NASDAQ all broke down from their narrow trading ranges since early August. Watch out for any weakness and associated volume with it. If weakness is “weak” and not sponsored by increasing volume than this pullback may be a normal pullback as opposed to any significant pullback.

If the decline continues, the support levels should be in the 8920-8,930 followed by 8,750-8,800 for the DJI, between 960-965 followed by 940- 950 for the S&P 500 1,906-1,900 followed by 1,860-1,870 for the NASDAQ Comp.

While one day’s decline doesn’t mean much, it’s time to be careful.

As I mentioned earlier, for markets to move significantly higher economy first needs to deliver what is already factored in. Else, money doesn’t grow on tree nor it can be printed to its way for prosperity. May be it is for the government, but surely not for a retail investor like me.

We have opened September’09 income portfolios partially. If you would like to join OPNewsletter, click here to sign-up for the waitlist.

Profitable Trading, OP



, ,




Leave a Reply

Your email address will not be published. Required fields are marked *