Home > Uncategorized > Weekly Overview: 2010/01/26: Do Equities Holding Mean the End of the Selloff, or Merely ‘The End of the Beginning’?

Weekly Overview: 2010/01/26: Do Equities Holding Mean the End of the Selloff, or Merely ‘The End of the Beginning’?

▪ Last week’s sharp weakness can be explained by many factors,… But the key is that it occurred at all.  Whatever one may think of how the equities trend will unfold from here, the serial technical failures are now obvious. They also span many variations from March NASDAQ 100 future failure on retests of its 1,890-93 key topping action from two weeks ago, right into the recently more resilient DJIA looking tired on its 10,600 area UP Break from a very rare Flat Bottom Widening Pattern. 

▪  As noted previous, the ultimate test was going to be whether March NASDAQ 100 future held the 1,850 area, below which significant supports are in the low 1,800 area, and 1,782 major Fibonacci 0.618 retracement overrun on the way up. Similarly, as DJIA  capitulated below its UP Break Tolerance at the 10,423 selloff low hit on the last trading day of last year, it was likely to also violate the late-November and early-December lows in the 10,230 area that formed the ‘flat bottom’ of the pattern.

▪  Speaking of selloff lows from late last year, last year’s Closing prices are also relevant as we head toward the end of January regarding the notorious January Effect: the tendency of January’s direction to set the tone for at least the first part of the year. DJIA: 10,428; S&P 500 future: 1,010.00; NASDAQ 100 future: 1858.75.  However, even with all that said, we must respect that equities have indeed stabilized for now.  We have previously alluded to the almost eerie similarity between the current DJIA activity and the top in July 2007,…  

▪ Also of course, this significant focus on the equities is due to the heavy intermarket influence it provides trends in other asset classes, whether counterpoint for the govvies and US dollar, or more direct influence into the February Gold and Crude Oil contracts. The US dollar is especially interesting insofar as the other currencies have now experienced weakness against it even if the euro led the way due to the confluence of European problems.

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