Market’s Trend is Clear – Down

China and Germany reported larger-than-expected trade deficits yesterday.  Japan revised its Q4 GDP downward by 1.3%, and Spain had its debt downgraded by Moody’s with a negative outlook.  And if that wasn’t enough bad news for one day, the U.S. reported that initial jobless claims for March totaled 397,000 vs. an expectation of 382,000.  For a market that has been focused on news, it was no surprise that stock markets around the globe were pummeled by sellers.

Daily Stock Market News

Dow: -228 at 11,985

S&P 500: -25 at 1,295

Nasdaq: -51 at 2,701

Volume & Breadth

NYSE: 1.2 billion, decliners ahead 4.7-to-1

NASDAQ: 663 million, decliners ahead 5.8-to-1

Futures & Related ETFs

April Crude Oil: -$1.68 at $102.70; Energy Select Sector SPDR (NYSE: XLE) -$2.78 at $73.83

April Gold: -$0.90, settled at $1,411.60; PHLX Gold/Silver Sector Index (NASDAQ: XAU) -$3.34 at $208.78

What The Markets Are Saying

The triangle formation of the major indices, which is sometimes called a “coil,” released with a violent explosion of selling yesterday that rocked exchanges around the world.  The U.S. market gapped down on the opening bell with the Dow Industrials off almost 150 points on the first trades of the day, and by the close selling volume had exceeded buying volume by more than 10-to-1.

All of the indices suffered major setbacks, but Nasdaq’s technical condition is worse than the senior indices.  By plunging through the significant support from 2,745 to 2,766 and slicing through its 50-day moving average on a break-away-gap, the Naz flashed a significant bearish signal.

Yesterday was the first time since September that Nasdaq has closed below its 50-day moving average, now at 2,745, and this too builds a strong case for the bears.  There is but one support line between yesterday’s close at 2,701 and the breakout zone of December at 2,600, and that is at 2,675-2,676 which is a combination of the low of January 31 and the highs of December.

The DJIA and the S&P 500 also broke through major support.  Both violated their 50-day moving averages, and both closed under the psychologically important round numbers of Dow 12,000 and S&P 1,300.  The next support for the Dow is at 11,800 and for the “500” it is 1,275.

In just a few hours Nasdaq shifted down for both the near and intermediate trends.  The series of lower lows and highs could form a channel down with resistance at 2,775 and resistance possibly at just under 2,675.

Conclusion: The major indices led by Nasdaq have broken near-term support, and Nasdaq has confirmed that its intermediate trend is down.  Stock investors should sell into rallies and take profits in technology and other issues that have done well in the last six months, or sell options against them.  They should also begin the process of identifying strong sectors and stocks in those sectors that they would like to own at prices which could become available in a normal 10%-15% market correction.  But buying now should be confined to defensive stocks like high-yielding utilities, preferred stocks, and some stocks outside of this country that have done well like those of Brazil.  Gold, silver, and other industrial metals should be on a buy list but at lower prices.  It appears that the long-awaited “normal correction” has begun.

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If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.


Article printed from InvestorPlace Media, https://investorplace.com/2011/03/stock-market-news-trend-down/.

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