MARKET COMMENTARY

Alright, the markets sank as anticipated. This is a classic Trampoline setup that can be confirmed further by another day of sell-off on Friday. The volume, too, had increased to make it a stronger probability for another day of plunge next. The only concern is the influence of the oil price. It is weak and so far the general view on the market is that it would help to lift the Dow higher.

I have mentioned in my previous post several days ago that the crude oil price should break its inverse relationship with the financial market this time. Both would descend concurrently this time round. This has yet to materialize but I am inclined to see that it would happen. Friday’s trading can be a good test for my theory. Mind you, the oil price continues to fall despite the threat of hurricanes in the Gulf of Mexico and pipeline attacks in Nigeria. It did not halt the drop in oil price. The human sentiment is rife with worries strong enough to deflect any fundamental truth of certain facts.

The Dow is trading near the 50-day moving average (MA) before making the U-turn. This makes the MA a strong resistance. It would strengthen the validity of the resistance if it continues to make new low that breaks the support line of the triangle pattern.

DJIA Daily Chart

I failed to see the rising wedge earlier. The chart pattern is bearish. With the declining volume that I glimpsed from its ETF (IWM) chart which makes it a case of price-volume divergence, the strong bearish storm is brewing. You may want to watch the market a little later, not just the Olympic opening ceremony.

RUT Daily Chart

The Nasdaq retreated just as the Dow. Now, it is also a case of Trampoline. The 50-day MA is a real resistance. We may have a candlestick setup that called Bearish Harami forming.

NDX Daily Chart

STOCKS TO WATCH:

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