Friday, August 10, 2007

Today's Markets

OK -- the week is over. Let's take a quick look at what happened.

Today, the main news was the Fed's announcement that they would add liquidity to the market if needed. This gave the market a floor. We opened lower and rallied twice.

Here's the 5-day chart. Remember that for Monday through Wednesday the subprime problems were behind us. Then came more news of serious issues in the debt/credit markets and the market tanked.

Here's where the rubber meets the road. Once again we're clinging to the 200-day SMA. This is a very important technical indicator. If prices close below the 200 day SMA for an extended period of time, we're looking at a bear market.

From a technical perspective, notice the 20 and 50 day SMAs are moving lower. Because the SPYs are below both of these numbers, these averages will continue to move lower. They will also provide upside resistance in a rally. The only good thing about these SMAs is they are about a point and a half below where they were when the market started first started dropping to the 200 day SMA. That means the market will have to move a smaller amount of points to test upward resistance.

Here are two more charts of the SPYs. These are year-long daily charts that use both Fibonacci fans and retracements. Notice the SPYs are near crucial levels for both the fans and retracements.

The bottom line is the markets are still in bad shape. They are are still clinging to support at areas where the psychology could change from bullish to bearish very quickly. While the Fed's move today will help ease some tension, the market really didn't rally that hard after the announcement and still closed down for the day. That means bulls are still on the sidelines. And the announcements from Countrywide and Washington Mutual and the negative reactions to these announcements indicates there are still a lot of people out there willing to pull the trigger at a moments notice.