BROAD STOCK MARKET UPDATE (2:30 pm EST)
It looks like our anticipated correction in the broad stock market is following through as equities are down sharply for the week. We need to watch this market carefully, however, as all three indices are now approaching potential support lines. The DOW seems to have paused at it's 15-day moving average, the S&P 500 may be getting support at its 45-day moving average, and the NASDAQ (the most bearish of the three as it has broken below both its 15-day and 45-day moving averages) could be finding support around 15,000 (or 14,860 - its Dec. low). We are in the center of a minor reversal zone (Jan. 5-11), so theoretically, a bottom could be forming now. But there is a much stronger reversal zone coming up next week (Jan. 11 - 20), and it would make more sense for this correction to bottom then. Furthermore, the ideal target for a corrective low in the DOW would be around 35,600, and this index is still a good distance above that level right now. A clear break below 14,860 in the NASDAQ would probably confirm a bearish trend for all three indices, but until that happens, we have to be aware of the possibility of a bullish rally reasserting itself. Right now, the DOW and S&P 500 are suggesting this could happen, but the NASDAQ is definitely leaning in the bearish direction. Thus we are seeing mixed signals in this market. I am holding on to my short position in the NASDAQ for now.
It looks like our anticipated correction in the broad stock market is following through as equities are down sharply for the week. We need to watch this market carefully, however, as all three indices are now approaching potential support lines. The DOW seems to have paused at it's 15-day moving average, the S&P 500 may be getting support at its 45-day moving average, and the NASDAQ (the most bearish of the three as it has broken below both its 15-day and 45-day moving averages) could be finding support around 15,000 (or 14,860 - its Dec. low). We are in the center of a minor reversal zone (Jan. 5-11), so theoretically, a bottom could be forming now. But there is a much stronger reversal zone coming up next week (Jan. 11 - 20), and it would make more sense for this correction to bottom then. Furthermore, the ideal target for a corrective low in the DOW would be around 35,600, and this index is still a good distance above that level right now. A clear break below 14,860 in the NASDAQ would probably confirm a bearish trend for all three indices, but until that happens, we have to be aware of the possibility of a bullish rally reasserting itself. Right now, the DOW and S&P 500 are suggesting this could happen, but the NASDAQ is definitely leaning in the bearish direction. Thus we are seeing mixed signals in this market. I am holding on to my short position in the NASDAQ for now.
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