Although this may feel like the primary trend of the market has turned bearish we have not broken any long term support levels yet. I know that we are trading below the 50 day moving averages in all of the markets but that is not enough to say that the primary trend of the market has turned bearish. Right now my major focus will be watching the trend line (in all of the major markets) from the 2009 lows and their 200 day moving averages. I will also be looking out for a Dow Theory confirmation; it is when Dow Industrials and Transports take out their lows for the year at the same time (DJI 11,555 & DJT 4,906). This would turn the primary trend of the market bearish.
Currently the Dow Industrials remain the strongest market because they are farthest from their 2011 lows and also farthest from their trend line. The S&P is next followed by the Dow Transports and then the Nasdaq remains the weakest. The Nasdaq 100 cash market is in arms length of its 200 day m.a. while the other markets still have a little ways to go.
To start the week the most important chart is the Nasdaq. If the Nasdaq 100 cash can hold it's 200 day moving average (2,215.77) then I believe you will see a rally in the market. Also keep an eye on the Dow Transports. They are getting close to their trend line from 2009 lows (5,034) and their 200 day moving average (5,003). If either of these two markets takes out their 200 day moving average or trend line that would send a bearish message to the other markets, and we could see a sell off in the other markets looking to test their levels. If both the Nasdaq and Transports hold then I believe this will add confidence to the market and we will see a positive week.
Below are daily charts showing the trend lines from the 2009 lows and their 200 day moving averages (pink line).
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| $SPX |
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| $DJI |
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| $NDX |
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| $DJT |
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| $VIX |
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