The Dow tumbles 184 points today. S&P breaks 900 barrier and closes below 900. The 200 day average for S&P is 949 and the 50 day moving average is 847. So the S&P which closed at 883.92 is stuck between the two MA's and we should watch if it will make another break up for the 949 or go down and test the 847. Let us hope it is the former that will happen! The 200 DMA for Nasdaq is 1739 which the bulls would like to see the index break through. However, Nasdaq has been unable to do so backing of steadily ever since passing this level intraday on May 7th.
Before we look at what the charts are saying just how are the analysts interpreting this movement in the markets today?
Jim Cramer of Mad Money says it is Washington that is meddling that is causing the markets to lose heart. He also says that consumer spending being down more than expected is a factor. He has been extremely bullish and now is finding reasons to remain bullish while trying to cover his bases so he can say "I told you so!" if the market heads south.
Pisani and crew on CNBC don't really know what to think. Depending on the time of day you heard them it could be any reason from the flood of secondaries to the 0.4% idecline in retail sales to one of the thousand reasons the traders they bump into mention in their conversations.
Various other pundits have various things to say which after listening to you are left more puzzled and agitated than you were before. So you ask InvestBaboo -- you can't possibly have yet another reason that these pundits and gurus haven't already covered in their spell. So what say you?
Here is what InvestBaboo sees:
The markets fall could be due to none of the above and it is just a correction to a market that was moving ahead of itself. It could be as simple as a investors who were quite nervous after the several-week runup and took profits at some bad news. Whenver I have seen so many people ascribe so many reasons for the market's move I have eventually found out with the benefit of hindsight it was really none of the above. While the markets are rational on a longer term basis they can be quite irrational on a daily basis. Today's move does not necessarily define the market unless... unless.... unless.... today's move becomes a trend which starts showing up on the charts which would then signal a Sell. If today's selloff does become a trend a million people will claim a million reasons and they could all be partially right or some fully right or none right. However, until today's selloff becoimes a trend we can't join the crowd and pick reasons on why things happened the way they did and where we might go from here. Instead we look to the charts to see what damage the selloff caused and if we need to take a drastic action.
So let us get to the point. Today's selloff did even smaller damage to the charts when just a couple of weeks back an analyst named Michael Mayo caused a huge selloff on Wall Street downgrading all bank stocks. That day I saw the charts alternate beween a normal state and a sell state. Today at no point in time the charts flashed a sell signal. The Nasdaq looked the worst chart of all seemingly pushing on the limit but still hanging in there not quite ready to give up its bullish stance.
As far as I am concerned there is no bend at the end of the trend at the present. At a personal level I philosophized today about the past selloffs including the Mayo selloff when it seemed imminent the sky was falling and the markets were toast. However, the markets picked up and rocketed on upwards. I see no signal today to deter me from my bullish stance. As far as I am concerned the trend continues and the bend at the end of the trend has not yet happened.
Let us hope for a happy Thursday!