Thursday, August 26, 2010

Dow and S&P 500 bear signals in a 'graveyard market'

It's like this, not many buyers want in, and the sellers cannot get out, or don't want to get out = a graveyard market. With both the bulls and bears maintaining a stalemate anticipation of stock market divergence. i.e bulls say that a rally could be imminent, bears anticipate the 'mother of all' sells is coming. At this point the bears are holding the upper hand, so to speak. The Dow (using as an example of market conditions) has been showing significant selling pressure since July 2010 (refer to post: Dow showing selling pressure after two days of range trading), GMT trading on the 26th August 2010 has now confirm that sell pressure is now at a critical point as the Dow has now passed through the 'psychological' indicator (bearish) of 10,000. Volumes are extremely thin, the money flow indicators as calculated against volume such as the MFI and the OBV are now showing that the tank of liquidity that propels stocks is now drying up. This would further indicate (refer to post: US earnings - rallies markets into widening volatility), the Dow is now falling back into it's volatility ranges, that may continue to pressure to the downside. With a sideways (range trade) market, or now a graveyard market, the dead may just rot further as liquidity levels plummet and the Dow sinks to new lows for 2010

The volatility trend lines (ranges) are @ 9997 and 9110, once the Dow then trades within those ranges on thin volume high and volatile markets, a new support should be calculated in the low 9000's. This will be calculated once the Dow passes through the pivot point supports of: 9934, 9883, 9797

There is enough bearish indicators supporting that the Dow will now trade within the above volatility ranges, but the fundamental aspect is how significant the Federal Reserve and US Treasury will be supportive of markets; regardless, if substantial money printing occurs and some liquidity returns to the market, this will further cause, in my opinion, large swings in volatility rather than a sustained and supported rally back above 10,000.

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