Markets in Confirmed Daily Downtrend

Aug 16, 2007: 10:37 AM CST

There’s really no other way to state it: All Major US Stock Market Indexes are now in confirmed downtrends by most traders’ definitions:

  • Price has made a lower low, lower high, and then taken out that high
  • Price is below the 20 period, 50 period, and 200 period moving averages
  • The 20 period moving average is below the 50 period moving average
  • Both the 20 period and the 50 period moving averages are sloping down
  • Volume is increasing on ‘sell’ days

This is true for the Dow Jones, Nasdaq, Russell 2000, and S&P 500. There’s no denying it now.

Let’s allow the price charts speak for themselves:

Also, all major US Indexes have all experienced at least a 10% correction each from price highs to price lows.

There is one more chart I desire to highlight:

The Dow is testing the weekly support of the 50 period moving average:

Price has only dipped below this zone twice in the last two years… will it happen again?

Also, on all indexes but the Nasdaq, price is making new momentum lows and new price lows, a negative situation that forecasts that the absolute price low has yet to come.

I now officially classify all major US Indexes as being in a confirmed downtrend on the daily chart, and “significant correction” on the weekly charts.

Also, please note that the structure of the weekly charts are STILL in confirmed uptrends. Technically, this is a grand buying opportunity for weekly or longer-term position traders… until price breaks moving average support significantly.

At the moment, there is a trend divergence opportunity on the daily (downtrend) charts and the weekly (uptrend) charts.

Please be careful if you trade “long” only.


3 Responses to “Markets in Confirmed Daily Downtrend”

  1. B Hong Says:

    my charts show that, although we plunged through the 200 MA AND broke below the 10% level, that we are still above the 200 MA for the Dow. That leaves us with a huge dragonfly doji. Furthermore, the financial sector led the rally. Does all that change your interpretation? It was my understanding that it was the close, not the intraday, that mattered.
    BTW I liked yesterdays analysis and gave it a favorable mention.

  2. Corey Rosenbloom Says:

    Dr. Hong,

    You’re absolutely right – it is the close that matters most in candlestick and charting analysis, and I was just as taken aback as any with today’s absolutely impressive closing action. I had taken a break from morning trading during the lunch hour to post my observation of the market, and was absolutely floored – probably like most (if not all) traders – that the Dow and all indexes could stage such a marvelous and rapid recovery.

    This absolutely changes my personal perception and I will be updating the main page shortly to reflect this change.

    I honestly jumped the gun this morning and wanted to give an ‘early warning signal’ to readers, but I should have sat on my hands and let the market prove itself before I declared it ‘dead’. I was not positioned properly for the end-of-day action and took some tight stops on a few overly ambitious short positions that were profitable earlier in the day.

    Today’s action indeed forms a stellar dragonfly doji, but I want to add that it is likely going to be a “key reversal” day due to the immense amount of volume (shares traded). Days like this make it wonderful to be an active trader because there was so much opportunity and surprises for us all.

    I deeply enjoy your blogsite and perspective and am very thankful and honored for your comment.


  3. Traded Stock By Volume Says:

    Stock and Bond Trading as a Conservative Investment Strategy…

    It’s likely that either curiosity or skepticism led you to this article, and I would agree that, for most individual investors, trading is approached in a totally speculative manner….