The equity markets continue to fall to its lowest point in ten years. Many market analysts are beginning to suggest that the Dow is reaching the bottom. While I may not necessary agree that the market has hit bottom, a rebound is imminent. All technical indicators are displaying extremely overbought signals. If you are asking for the timing to take profit, this will be the time. Take them first and get back in later should you still think the markets will continue to move lower in the weeks ahead.

There is strong reason to believe that the Dow should make a technical rebound. The volume surged while the market made smaller decline on Friday. This is usually a reversal signal. Now, I also want to highlight the similarity of the S&P chart. In addition to volume, the S&P actually reached its major support now! This gives it another reason for the market to rebound.

Nevertheless, the overall market trend is still in the bearish. We shall now just stay out of the market and wait to go back on its normal track. You can certain try your hands to go long or buy calls in this bullish phase. To me, this is a risky maneuver. I don’t want the headache. You may go ahead.

Options traders can look forward to a low risk entry for bear calls. Watch the resistance area I marked on the charts. Sell anything ABOVE those lines. I hope you know what I mean. 

DJIA Daily Chart

S&P is different from the Dow in that it’s actually just reached the major support area. So, we do have another opportunity to trade the breakout should it happen. In the meantime, we take break from the market. Grab a beer and a pizza, enjoy the market show.

SPX Daily Chart

The Nasdaq has a very different chart. First of all, it has just broken its support not long ago. But it certainly had reached a new support (dashed line). The index is not very overbought yet but the mood of the market is ready for a rebound. The new support is now at 1770. I have changed the support line because I feel the 1770 is a more valid support than the 1780.

NDX Daily Chart

STOCKS TO WATCH:

Nil

Subscribe to the post comments feeds or Leave a trackback