Prior to Monday, the three major indices, DJIA, SP500 and Nasdaq 100 were riding on their upward trend line. When the week starts, the DJIA encountered three consecutive down days that took it down to near the 8250 level to find support. On Thursday, all three indices went up for the first time (the only time) this week and bought the DJIA back to the 200 SMA to test for resistance. The SP500 did not do too much better than the DJIA. It has broken below the 50 and 200 SMA before it bounces back above these two moving averages. Now, the SP500 is approaching the 925-930 resistance level where this level was previously its support. Not all is negative for the SP500. During the course of this correction, the SP500 50 SMA did crossed over the 200 SMA, but with a very weak (almost flat) up slope. The only index that seems to show some strength is the Nasdaq 100. After it has come down and tested the 50 SMA for support, it has recovered all its earlier losses and ended up with a small net gain for the week.
Next week will probably be another nail biter. Any signs of the DJIA fails to reassert and hold above the 200 SMA, and the SP500 unable to reclaim the 930 level, the bears will jump in and pound on them to retest those critical support levels I have indicated from my previous post. The only danger for the Nasdaq 100 is that it might be dragged down by the down draft from the DJIA & SP500. Presently, the tech sector appears to be the one with the strength and it probably will be the leader to take the market up if this bear market rally is to be continued.
For now, I will avoid the energy and the financials sector. I am also keeping clear away from the consumer discretionary and the consumer staples. The only sector I will focus on is the tech until the DJIA & SP500 have demonstrated they have regained some of the technical strength they have recently loss.
