Brief Weekly Index Overview

Mar 10, 2008: 10:21 AM CST

Let’s peek at some of the major Indexes to see what may be the next play in the upcoming weeks:

First, the Dow Jones:

Notice that the Broadening Top formation (bearish) that I mentioned months ago is completing to the downside.

Momentum keeps making lower lows, signaling the increased probability of lower index prices are yet to come.

A test of the 200 period moving average at 11,500 (red arrow) seems to be a near certainty (which is only 250 points away). The index may get a potential upswing (counter-swing) bounce at this level. This would cause a subsequent test of the January lows (when the market had the stellar recovery of January 22nd).

The most recent upswing (counter-swing) was not confirmed by volume (volume declined as price moved higher – blue line on volume). The recent downswing seems to be picking up more volume, further confirming the downtrend in place.

The moving averages have crossed, and price has found resistance (in the form of a long upper shadow) at that junction.

Now, let’s view the NASDAQ:

The long-term trend channel up was violated strongly with a large volatility move out of the channel, signaling a potential early trend reversal was at hand. This break was confirmed by higher volume.

Price surged down without stopping until it reached the 200 period moving average, which served as a key support level. That support level was broken with a close beneath it last week on (relatively) higher volume, further confirming the break.

Price made a new momentum low, signaling lower prices are likely yet to come.

One key note to remember is that the NASDAQ frequently leads the Dow Jones (and S&P 500) up and down. From a technical (and price performance) perspective, the NASDAQ had fared worse than the Dow and S&P, and this is a generally bearish sign for the major indexes, which signals that the big funds are worried about lower prices and are taking action.

For those who love going short, there are choice opportunities, but for newer traders, please trade with caution in this difficult market period we are experiencing currently. If you have been experiencing frequent losses, take a step back and preserve your capital, rather than trying to trade more aggressively and win back those losses. Bear markets can be more difficult to trade than bull markets.

Visit INO.com TV for access to a plethora of educational video seminars to help you during this time, or for deeper education, check out a membership to Market Club.com, which provides far more tools including scanning, daily news, “trade school” education, daily market videos/commentary, and trading signals.

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