FMX | Connect – www.fmxconnect.com - (Reported 5/21/2010)
Below is an except from Dan Wantrobski ‘s Chart Book: Macro Developments.
We are presently anticipating a trading rally over the short-run, as U.S. equity markets have pushed into deep oversold territory on their daily charts.
Yesterday’s action saw heavy destruction in the markets- with a majority of sectors and stocks participating in the selloff that gained momentum toward the close (which stands in contrast to the May 6th crash- which actually reversed higher by the end of the session).
The breadth chart above shows the depth of selling that took place yesterday: this essentially rivaled the ‘panic’ selling levels witnessed during the May 6th crash, as well as the October / November ’08 and March ’09 lows. This broad-based weakness has pushed the percentage of S&P 500 names trading below their respective 50-day moving averages to a paltry 5.8%- which implies bearishness is pushing towards extremes on a short-term basis. We therefore believe a trading rally is imminent.
The most likely scenario is for the S&P to converge with its declining 50-day moving average. That puts potential trading targets near the 1170 zone from here:
Continue to use the 1060 zone as initial support for the SPX- this is denoted by the trend line pictured above.
The corresponding rally targets for the Dow and the NASDAQ are as follows:
Index 50-Day MA Initial Support
DJIA 10,860 area 10,000
COMP 2400 area 2200
SPX 1170 area 1060
Credit to:
Dan Wantrobski, CMT
Janney Montgomery Scott LLC
Director | Technical Research
1801 Market Street | Philadelphia | PA 19103
O: 215.665.4446 | M: 215.495.3738
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