Friday, February 20, 2009

Dow Industrials resumes bear market, but NASDAQ and S&P 500 still within trading range

The Dow Industrials did manage to break below its trading range of the past three months yesterday, signaling an ongoing bear market ("lower lows"), but NASDAQ remains in its trading range, moderately above the November low. The difference is that ongoing worries about the banks has hurt the Dow much more than NASDAQ.

As I write this, Google Finance tells me that NASDAQ is at 1,483.83, up from the intraday low of 1,423.36.

For the record, the closing low in November for NASDAQ was 1,316.12 on November 20, 2008. The intraday low was 1,295.48 on November 21, 2008.

The S&P 500 index has still not broken below its November low, but that could happen within the next couple of days. The S&P 500 was at 765.63. The intraday low was 761.69, so far. It's November closing low was 752.44 on November 20, 2009. The intraday low was 741.02 on November 21, 2009.

I suspect that although the more doomish and gloomish of traders and short-term speculators would like to use the new Dow low as an excuse to take the market down further, there is a moderate chance that the "down" crowd will soon run out of cash for more bearish bets and soon begin to reverse and push upwards for a new trading range. They may decide to wait until the NASDAQ and S&P 500 doom and gloom crowds hits "selling exhaustion", but that might actually have occurred shortly after the open this morning.

In any case, best to give the market another week or so to sort it out and get past the euphoria of a new Dow bear market low before concluding anything about the NASDAQ and S&P 500 medium-term trend.

-- Jack Krupansky

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