Monday, January 7, 2008

NASDAQ 100 chart

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By taking a look back in the history we may see very volatile market since July 1997. We witnesses sharp declines and strong recoveries. In such volatile market I think it’s extremely important to relay on several trading indicators, monitor several timeframes and it’s better to stay in cash in uncertain situations.

Coming back to my favorite 60-day chart I may say that the technical indicators did not become more optimistic since last week. They were bearish a week ago and they are bearish now. The declining SBV, moving down MVO, decline in Advance – Decline difference, dropping MACD, RSI moving below 30, Stochastics moving below 20 and increasing VIX volatility index all points to the Bear sentiment. The picture is similar on all major indexes, including S&P 500, NASDAQ 100 and DJI.

SP 500

The logical question that could be asked is when may we expect the reversal? By looking at the same indicators we may see some points that may lead to the possibility of the coming changes in the market sentiment:

- Over the last 6 trading days the NASDAQ 100 dropped more than for 7%, S&P 500 and DJI more than 5%. Throughout this period I see a lot of green on the SBV that may point that we may see the reversal soon. Yet, until I see it advancing and moving closer to the zero line I would consider the market weak.

- Over the last week I saw big negative MVO that points on the big volume surges to the price downside. As a rule after big volume surges we may see the reversal, but, again, I would like to see the MVO rising to the zero line.

- Advances and declines show extremely low readings over the last 6 trading sessions that may indicate that the market could become heavily oversold. Yet, I would prefer to see the difference between advances and declines growing before making any assumptions about recovery.

- For several sessions in a row Stochastics and RSI were moving below 30 and 20 lines respectively. It tells us that we are far from the highs and we had dynamic decline and this could indicate an oversold market as well. Again, I would not consider those indicators Bullish until I see RSI moving up and crossing the 30 level and stochastics moving up and crossing the 20 level

As I mentioned above the stock market has been very volatile lately and the market sentiment could change very fast. The indicators that do not look optimistic today can become Bullish tomorrow. At least we saw it very often over the last couple of months.

1 comment:

Bill Luby said...

I just found my way here today and was impressed by quality of the commentary and charts.

Excellent work! I'll be looking forward to getting your feed.