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Although the equity markets really are not doing much, I feel very uptight right now. Why? Take a look at the enclosed daily chart of the S&P 500. Let's notice that today marks the third session of weakness, and the decline has pressed slightly beneath the rising 20 DMA (now at 1070) AND, more importantly, is testing -- perhaps leaning against -- the Jul-Oct up trendline (1061.80). So why am I so uptight? Well, in such circumstances, given the juxtaposition of the SPX and the above-mentioned important support factors, the market EITHER will ricochet off of the lines with power, or BREAK BELOW THEM, thereby triggering a potentially nasty decline (another 20 S&P points for starters). I really do not know which scenario to expect right now, but the bears have control of near term market direction, so I will go with a BREAKDOWN that violates the Jul-Oct trendline on the way to 1045/40 next. MJP 10/27/09 1:25 PM ET (1062.56)
Mike Paulenoff is author of www.MPTrader.com, a real-time diary of his technical analysis & trade alerts on ETFs for precious metals, energy, currencies, and an array of equity indices and sectors, including international markets, plus key ETF component stocks in sectors like technology, mining, and banking. Sign up for a Free 15-day Trial!
