What to Expect?

The past week was short (Thanksgiving week had three full trading sessions and one short trading session), yet, quite volatile. Actually, we may consider that since November 18, 2010, the DJI and S&P 500 are in side-way volatile action. The Nasdaq 100 index (mainly because of the swing at the morning on November 24) is only about half of the percent higher.

While the main indexes (S&P 500, Nasdaq 100, DJI and Russell 200) are topping sideway, there are some indexes that are in clearly defined down trend - as an example, see Dow Jones Utilities index that could be considered in down-trend since October 20, 2010 and S&P 500 Financial index that has been moving down since November 4, 2010. Overall, lately we had mostly negative and side-way sentiment.

Taking look at technical analysis from the mid- and long-term prospective we may not see a lot of positive signals. The money flow on daily charts (1 bar = 1 day) is moving down. It is not negative on the S&P 500, DJI and Nasdaq 100, yet, it is close to become negative. After September-October rally up, the indexes could be considered quite overbought. Yes, some traders may say that the correction we had during the second week of November could be enough to release the stock market from its overbought pressure, yet, it is difficult for me to believe in that by the following two reasons:

- Some indexes are still in decline.
and
- We did not have any strong volume volume surges during that correction (with exception on the Nasdaq 100). The correction down does not ends on low volume. In most cases corrections down and down-trends have strong volume surges at the bottom and we have not seen it yet.

Overall, I'm still bearish over mid-term. However, I numerously mentioned in periods of side-way trading that when there is a clearly defined upper and lower line of side-way corridor (as it is now on the S&P 500 and DJI) it is always a good trading strategy to set a stop-loss.

From the short-term prospective, technical analysis is not positive as well. The money flow on 1-min, 5-min, 15-min and 30-minutes charts is negative. It is neutral on hourly charts. I would expect to see negative trading session tomorrow. However, we should remember that volatility is at high levels and we may see strong swings in either direction. Personally, I plan monitoring 15-min and 30-min charts tomorrow.