I'm always saying that the low volume moves (usually rallies) don't matter until they do. Well we're finally seeing the unwinding of the light volume rally that took place over the holidays. Today we had the highest volume in about a month. So the technical picture is starting to get some cracks in it. The Dow broke its 50-day moving average today and is back below its November highs. The S&P is real close to following suit. It closed just above its 50-day and is in danger of giving back its December (low volume) breakout to new highs. I'd caution the bears not to get too excited though. We've seen plenty of pullbacks like this over the last several months which only turned out to be buying opportunities. The battle for control of the 50-day moving average should tell us if this is anothe buying opportunity or the start of a real top.
The Nasdaq is in a little better shape but it may be under pressure tomorrow given the after-hours action in the QQQ after Google's earnings. It may very well end up in the same position that the S&P is in -- right near the 50 DMA and the November highs. That would wipe out all of the late December, low volume rally.
Here's a GOOG chart which doesn't show the after-hours losses. It's been a rough January for the stock. First it had a sell-the-news reaction to the Nexus One phone, then China issues weighed on it and now it's earnings. People have been on CNBC defending it all the way down and they did so tonight as well. I remain unconvinced. I want to see it show some strength before I become an interested buyer. I don't see any significant support before the 500 level, so I see no reason to be in a rush to buy it here.
One downgrade today
| Trend | Nasdaq | S&P 500 | Russell 2000 |
|---|---|---|---|
| Long-Term | Up | Up | Up |
| Intermediate | Up | Lat(-) | 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.
GOOG was forming a rounding bottom b4 the results.
After-hours gap down due to sales lighter than estimate.
IMO, we get a second attempt by insti-accounts to form another rounding bottom @ between 530 - 560 levels
If we use the same horizontal support for the S&P500 as Michael did on GOOG we could see meaningful support approximately at the 200 SMA 1000-1018 or from last June's range of 930-950 - personally, I'd rather see the latter.
I'm beginning to think the recovery in the stock market might be over, in the UK, the increase in the FTSE 100 seems to do with the banks looking for a place to invest the newly printed money, but now QE is ending.
What would it take to confirm that the rally is over for you Mike?