DJI Volume

As I expected in my last "Technical Analysis" report, the market dropped down. The question I can put now could be "Is there a possibility that the current move down could develop in something stronger and push stock market lower towards the January 23rd and March 17th lows or this is just a healthy correction within the mid-term down-trend?"

There are several factors that points in the favor of the further slide as well as there are a few points that tells that the stock market may reverse soon back into up-trend.

First of all the index based technical indicators are still bearish and point to the higher possibility of the further slide over the next few trading session. I have pointed in the previous repos that the volume surge generated during the index up-move on April 1-2, 2008 (see green MVO) may push the market down, and now we see the U.S. indexes in the correction. The good news is that we may see the equally high volume surge during the index drop on the Dow Jones Industrials (DJI) (see red MVO) – very strong volume to the DJI down-side and very good sign for a reversal in the near future; however, we still see nothing in the NASDAQ 100 and S&P 500 market sectors. That’s why I’m still concern about possibility of the further slide.

Over the mid-term I’m still on the side of the up-trend. It is still difficult for me to believe that the huge volume of the shares that was dumped on the market in January and March 2008 is already processed by the stock market. I think everybody agrees that majority of traders, and portfolio managers were selling in this period, yet there was a second group of (I believe small and powerful) of traders who bought this huge amount of shares and now the stock market may go into further recession (on my opinion) only after this second group of traders start to sell these shares…