Tuesday, February 24, 2009 at 01:12PM | Asher Pinto
The following is the nightly commentary piece that was provided to members of TheMarketMessenger.com, on Monday evening.
The major indices each lost just under 4% today. Many have also incidentally closed below long-term lows.
Aside from the Nasdaq indices, most indices are now in oversold territory, which as we'd mentioned in the weekly commentary piece does not mean that a bottom is already in place but rather that the slightest instigation could soon (as in time, not necessarily price level) bring about at least a dead cat bounce that ends up killing a good number of short positions.
Let's take a look at the charts.
S&P-500 Index - Daily Chart...
SPX closed below its November '08 lows today. At 743, today's close fell just short of breaking the intraday lows from November, but it happens to be at an 11-year closing low nevertheless. Volumes were above-average again today, which is a good sign for those of us looking for signs of capitulation.
The index is now not very far away from the target of the rectangle that formed on the charts between mid-Jan and mid-Feb.
RSI sits in oversold territory as of today's close. There are no buy signals as yet, but we'll now need to be on alert for a whiplash move to the upside. It could happen at any point (as we'd mentioned in 'The Big Picture' yesterday).
Truth be told, one of the biggest reasons that we believe a sharp rebound is near (once again, from a time perspective, not necessarily price-) is the fact that there is an unfilled gap on the charts (from last Monday's open). One would be somewhat surprised to see the gap remaining unfilled for much longer. The fact that the gap is at or around the level of the 20dMA makes it a potential target for any rebound.
Dow Jones Industrials Average - Daily Chart...
The Dow has now closed below it's 2002 bear market low of 7197 and, at today's closing level of 7115, it sits on the cusp of the round-number level of 7000. A level not seen since the beginning of President Clinton's second term.
Note that the target derived from the descending triangle has been met as of today.
That aside, volumes were above-average once again, which is a sign that capitulation is taking place. The fact that RSI has moved into oversold territory means that a dead cat bounce (if not a longer-term bottom) could be coming.
Nasdaq-100 Index - Daily Chart...
NDX, which is one of the few indices not to have reached or fallen below its November lows has reached minor support at 1135 today. In doing so, the index has also closed just below its lower bollinger band, which is reluctantly starting to point downwards, but not at a fast enough clip to allow for a swift drop immediately (or at least that's what one would think).
One would imagine that a quick bounce to the 20dMA might be in order, so that the bands can be given room to expand before any further downside becomes a probability.
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Final comments:
While many technicians may see the break of crucial support levels over the past couple of sessions as nothing other than bearish, we've elucidated several reasons why you'd want to be very careful on the bearish side.
We have several big winners on our short picks list and, given the potential dead cat bounce, our goal will be to milk current shorts for as much as they are worth but to open very few, if any, new ones. Stops have been tightened significantly today.
In fact, if there is a big drop at the open tomorrow or on the day after, we'd consider booking profits on many open short positions.
If lower levels continue to be eked out over the coming sessions, you'll see lots of long picks added to the lists, with an aim towards capturing quick profits courtesy the impending dead cat bounce.
« Nightly Commentary - Feb 23, 2009 »
The following is the nightly commentary piece that was provided to members of TheMarketMessenger.com, on Monday evening.
The major indices each lost just under 4% today. Many have also incidentally closed below long-term lows.
Aside from the Nasdaq indices, most indices are now in oversold territory, which as we'd mentioned in the weekly commentary piece does not mean that a bottom is already in place but rather that the slightest instigation could soon (as in time, not necessarily price level) bring about at least a dead cat bounce that ends up killing a good number of short positions.
Let's take a look at the charts.
S&P-500 Index - Daily Chart...
SPX closed below its November '08 lows today. At 743, today's close fell just short of breaking the intraday lows from November, but it happens to be at an 11-year closing low nevertheless. Volumes were above-average again today, which is a good sign for those of us looking for signs of capitulation.
The index is now not very far away from the target of the rectangle that formed on the charts between mid-Jan and mid-Feb.
RSI sits in oversold territory as of today's close. There are no buy signals as yet, but we'll now need to be on alert for a whiplash move to the upside. It could happen at any point (as we'd mentioned in 'The Big Picture' yesterday).
Truth be told, one of the biggest reasons that we believe a sharp rebound is near (once again, from a time perspective, not necessarily price-) is the fact that there is an unfilled gap on the charts (from last Monday's open). One would be somewhat surprised to see the gap remaining unfilled for much longer. The fact that the gap is at or around the level of the 20dMA makes it a potential target for any rebound.
Dow Jones Industrials Average - Daily Chart...
The Dow has now closed below it's 2002 bear market low of 7197 and, at today's closing level of 7115, it sits on the cusp of the round-number level of 7000. A level not seen since the beginning of President Clinton's second term.
Note that the target derived from the descending triangle has been met as of today.
That aside, volumes were above-average once again, which is a sign that capitulation is taking place. The fact that RSI has moved into oversold territory means that a dead cat bounce (if not a longer-term bottom) could be coming.
Nasdaq-100 Index - Daily Chart...
NDX, which is one of the few indices not to have reached or fallen below its November lows has reached minor support at 1135 today. In doing so, the index has also closed just below its lower bollinger band, which is reluctantly starting to point downwards, but not at a fast enough clip to allow for a swift drop immediately (or at least that's what one would think).
One would imagine that a quick bounce to the 20dMA might be in order, so that the bands can be given room to expand before any further downside becomes a probability.
----------
Final comments:
While many technicians may see the break of crucial support levels over the past couple of sessions as nothing other than bearish, we've elucidated several reasons why you'd want to be very careful on the bearish side.
We have several big winners on our short picks list and, given the potential dead cat bounce, our goal will be to milk current shorts for as much as they are worth but to open very few, if any, new ones. Stops have been tightened significantly today.
In fact, if there is a big drop at the open tomorrow or on the day after, we'd consider booking profits on many open short positions.
If lower levels continue to be eked out over the coming sessions, you'll see lots of long picks added to the lists, with an aim towards capturing quick profits courtesy the impending dead cat bounce.
----------