Thursday, March 10, 2011

Deja Vu - NASDAQ Breaks 50 Day Moving Average

Let's try this again - we just had this conversation Monday.  The NASDAQ (yet again) has broken the 50 day moving average, although today's move is more impressive than the last occurrences as it was a gap down situation.   Hence, no part of today's range in the index has been above the 50 day moving average.   When this break of support happened early afternoon Monday, the NASDAQ turned on a dime and rallied 1% in just over 2 hours.

[click to enlarge]

As I state constantly, what matters is the CLOSING price not the intraday price BUT today's action is not looking prone to a 'stick save' situation (late day rally) as we saw the other times this happened the past few weeks.  Hence I would be quite surprised if 'dip buyers' were bailed out today. As for 'da bears' - they want to see a close below 2730 on NASDAQ.


The S&P 500 has come down to sniff the 50 day moving average as well, but the NASDAQ has been the indicator of where the bulls charge in the past few weeks so I'll keep a closer eye there.  Obviously a close below 1294 on this index would be a double whammy.  That would be both a close below the 50 day moving average AND a close below the intraday low of 2 weeks ago.

No place for heroes here - I continue to stress caution and de-risking.  Remember, we have major air pockets below these key supports since the rally has been so vicious and shorts eviscerated for half a year; therefore they are not going to provide the natural support as in a normal market when they cover.

It is fun to see a 2 way market once again - first time since November.

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