Well it was looking like a pretty harmless pullback last week but today we got the catalyst(s) to really create some downside damage. The same old global economic/financial worries that have been plaguing the market for what seems like forever came back to the forefront today. On November 4th I wondered whether the gaps up that day were of the exhaustion or the continuation variety. They certainly feel like exhaustion gaps now. I don’t know how much of that buying was short-covering vs. actual new longs but those new longs have to be seriously questioning themselves right now… assuming they’re still long.
I don’t like (for the bull case) that the indices have slipped back beneath the spring highs but it’s still promising that they haven’t broken their 50-day moving averages. Those moving averages are where I’m looking for buyers to step up and support the market. So I’ll be looking for some hammer-shaped candlesticks to start showing up near 50-day moving averages in my stock scans over the next couple of days. In fact, I’m already seeing stocks (like AMZN) try to bounce at their 50-day averages. I’ll be looking to get long above those reversal patterns if they appear.
The short-term trends flipped to down late last week when the 10-day moving averages were broken.
| Trend | Nasdaq | S&P 500 | Russell 2000 |
|---|---|---|---|
| Long-Term | Up | Up | Up |
| Intermediate | Up | Up | Up |
| Short-term | Down | Down | Down |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
*** I’m simply using the indices’ relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.