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Markets Fall and Will Fall Further

May 07 2010

Markets Fall and Will Fall Further

The markets began correcting at the end of April with three out of four of the market stock indexes now giving a sell signal. Taking a look at the ClearStation.com index charts present on their home page, you can clearly see the top formations and the hold signals at the end of April this year. The sell signals all came yesterday on the major downturn for the markets with the Nasdaq Composite, the Down Jones Industrials, and the Standard & Poors 500 all in the red today.

I would like to say that I cleanly traded this reversal in the indexes but I was a little late selling some Ultra S&P 500 Proshares (SSO). Watching the fundamentals of the markets and the overall good news of the earnings season, I felt the softness in the indexes was a temporary situation. But with talk of Greek debt troubles day after day, the weak opening on May 4th, and the continued weakness throughout the day on May 4th, led me to sell my position completely in the after-hours market.

I would like to feel that the markets are going to turn around and continue the nice run they have had over the past three months, but there is a clear technical break below resistance and the new trend is down. Looking at the number of Put contracts being purchased on the SPDR S&P 500 (SPY) today should give everyone a clear indication of the sentiment of the markets.

The only good news is the retracement to 50% of the rally has been reached. The three month rally began at $105.89 a share of SPY and moved to a 90 day high of $121.81 a share on April 23rd. A 50% retracement occurred at $113.85. Look for a base formation in the index and start to build a new long position when there’s a breakout to the upside.

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