Monday, October 15, 2007

Today's Markets

Over the last week or so I have expressed concern about the possibility of the SPYs forming a double top. That concern is increasing, especially after today's action.

First, notice the markets started to move lower early, then continued with their downward trajectory for the rest of the trading day. That's never a good sign. Citigroup's news was obviously bearish, but oil closing at a record high certainly didn't help.

Here's the three-day chart. Notice that twice in the last three days we've had big sell-offs. That means traders are looking for a reason to sell, and certain news or technical events are giving them the impetus to sell.

On the 10-day chart, the trend line is from a few days before the Fed cut rates. The markets have clearly broken that trend.

Here's a 3-month SPY chart. We still have an uptrend in place, but the markets are very close to it. To maintain the trend, the markets will have to rally over the next few days.

Here's another culprit of today's sell-off -- oil. The USO ETF tracks the oil market. Notice this market is rallying quite well.

The QQQQs are still in positive territory, but are also approaching the trend line. However, remember the markets have diverged somewhat. the QQQQs have broken into new technical ground while the SPYs are getting hung up at previous resistance.

The Russell 2000 broke trend today. If this action is confirmed over the next few days we'll know that traders are shunning the riskier parts of the market, which could be a bad sign for the more conservative stocks.

The mid-cap's are still in good technical shape -- their trendline is still firmly intact.

Finally, here's a 6-month SPY chart. Notice the average is running into strong technical resistance at previous highs.