Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Market Update: Where's the Love?

By

Tuning out the noise and tuning into the price action allows us to get a much better read on psychology (price) than trying to directly analyze our own market emotions.

PrintPRINT
The past six weeks have been an interesting ride full of crosscurrents and cautionary tales in the financial markets.

Rewind to the week of September 10. The markets were rocketing higher, yet the AAII bulls vs. bears poll was showing a virtual tie: 36.46 vs. 32.99. Although some probably saw the relatively low number of bulls as a bullish indicator, I saw it as confusing. First and foremost, the markets had just moved 15% higher from the summer lows. Shouldn't this number have read something like 45 or 50% bulls?

To me, uncertainty was seeping in. October was on the horizon, and future prospects of the presidential race and coming "fiscal cliff," were beginning to weigh on the markets. The S&P 500 (INDEXSP:.INX) was working on a short term top that week, and just as important, the Nasdaq 100 (INDEXNASDAQ:NDX) put in its own top the following week (see charts below). Additionally, Mitt Romney caught the markets off guard by clearly winning the first debate; this charged the markets with emotion, but also forced participants to digest the prospect of change. And finally, tech leaders like Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) began transitioning from smaller stock price pullbacks to larger corrections.

So here we are today. Many everyday active investors are confused and guessing based on their own sentiment/emotion. And it is in times like these that I find technical analysis to be the most helpful. After all, tuning out the noise and tuning into the price action allows us to get a much better read on psychology (price) than trying to directly analyze our own market emotions. So what are the markets telling us?

Let's turn to the charts. Being that tech has really led the markets lower, let's start there. As I cautioned about a couple weeks back, the Nasdaq 100 has dropped sharply lower out of a head and shoulders topping pattern. It is now coming into the targeted price zone for that pattern, as well as the 200-day moving average. Layer in an RSI of 33 and it appears the index may be nearing a tradable bottom. But I still believe caution is warranted, as the index has more or less stalled at this level and needs to show some follow through to the upside. One possibility may be for a quick washout below the 200-day moving average. If lower, watch the 2600 level.


< Previous
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE