What Was Once Support May Now Be Resistance
2nd November 2009
The 50 day MA has provided strong support for the SP 500, DJIA, and the Nasdaq as the stock market has risen from the ashes of the March lows. After last week’s pull back, the DJIA is still being held up at this level, but the SP 500 and the Nasdaq are being held back by this widely followed moving average.
While all three of these indices broke down through the 50 day MA back in June, they were all held up by the lower Bollinger Band, just as they are today. What may be more important here is that the 200 day MA is not providing the reinforcement that it was back in July. Should we break down from here, that is most likely how far down this market could go. That would turn this 5% pull back into a 15% correction.
With unemployment coming out on Friday, this will be an important week for the financial markets. This could be a good opportunity to add to long positions, take your profits and sit on the sidelines while the market corrects, or at least add some insurance to your current positions by using option strategies.
JD
