Trader MD

All the major indexes have been trading in channels since the Bear Stearns low of March 17th. Below I've highlighted the S&P & Russell 2000 along with key levels to pay attention to.

In the near term, most of the indexes have also put in double tops.

Out of all the indexes, based on their channels, the weakest one is the Russell 2000 and the strongest is the Nasdaq.

In comparison to the 200 day moving average, the Transports are the only major average above that level.





If nothing else, the index charts are telling us to be a little more defensive and to tighten up those stops. More aggressive traders may look for an entry to go short.

Some things to dislike about today's breakdown:

• The energy sector (XLE) has been trading up with crude oil, but today as crude made a new high, the XLE began to break down.
• The dollar has also decoupled from oil. The dollar was up ~2/3 of a percent today and crude was up ~1.5%.
• The financial sector (XLF) sold off ~3.6% while the S&P sold off ~1.8%.
• The Russell is starting to break down out of its uptrending channel, after being a laggard this entire rally.
• Emerging markets like Brazil & China that were doing well recently sold off ~3% (EWZ) & ~6% (FXI), respectively.
• Volume picked up as the sell off accelerated.
  

It's still too early to tell if this is a correction, or the start of something bigger.

If the market continues its weakness tomorrow, one stock that I think can break down is ISRG.

It's been forming a bearish flag on declining/low volume since its earnings gap down a few weeks ago.

Posted by Trader M.D. at 6:58 PM

Labels: Index, Recap