It got real ugly yesterday if you were long technology. The NASDAQ and QQQ are both sitting in the vicinity of their 50-day moving averages. That area has been support several times throughout this almost year long rally. SO I expect the bull to put up a bit of a fight. We have a big economic report tomorrow, the unemployment report, which may override any technicals though.
I think this selling has a bit more to go. Even though we could get a little bounce sometime the next week. We’re due for a 10-20% pullback, and february tends to be weak. Any bounce might be a good place to set up some shorts. JMHO!
What do y’all make of the meltdown in Dow Transports?
What little I know of Dow Theory is that bad news shows up first in the trannies.
here’s a chart: http://stockcharts.com/gallery?$TRAN
I believe the way Dow Theory works is that both the transports and the industrials must move in the same direction to confirm a trend. So, if the indsutrials finally break down like the transports, we could be at the beginning of a new bear market. Notice though that the industrials have been meandering along while the transports have collapsed. We currently have a non-confirmation, and the collapse in the transports could end up being a head-fake for the bears – albeit a pretty convincing move! The problem with all this is that by the time you get a confirmation, the majority of the move may already be over. Regardless, it is something worth tracking.
For some other examples, look back at the charts to see the critical times when both the industrials and transports were hitting new highs and thus confirming the up-trend…