Markets Start New Year Off Negatively
While 2007 was an up-year for the US stock market, 2008 is off to a rocky start so far.
We saw the Dow Jones Index fall 100 points on Monday and 220 points today, taking price through a technical barrier and setting the stage for a potential technical breakdown.
Let’s look at the Daily Chart:
The midpoint of the triangle formation was marked uniquely by the convergence of the three key moving averages.
Price has now broken beneath that key triangle consolidation zone and appears poised initially for a retest of the October and November lows around 12,700. It would honestly surprise me if these levels were not at least tested soon.
Ignore recent volume readings due to the holiday effect. It is therefore not accurate to say that “volume increased as price broke the triangle” because relative volume has been low due to the holiday season. Volume in general is now picking up across the board due to the end of the holiday season.
Admittedly, it appears that the NASDAQ index is showing a superior technical picture on the daily time frame.
A break below the key 200 period moving average as well as the recent up trendline (which appears to be part of a larger consolidation pattern) would invalidate any bullish hopes.
A break of the triangle sets the stage for at least retest of the November lows at 2550 if not the August lows.
What set the stage for today’s decline? Among other things, Crude Oil prices breached $100 for the first time ever.
Should Crude Oil prices trend higher (as they appear to be doing so), then this would be a negative factor for the broader stock market indexes.
Of course, all this provides excellent inter-market opportunities for savvy traders.