How Much Lower Can We Go? Asks Market Timer Frank Kollar
November 23, 2007 (FinancialWire) (By Frank Kollar)
The volatile ups and downs that have marked the U.S. stock market these past few weeks, with mostly downs over the past two weeks, are bring the market close to do-or-die levels.
The S&P 500 Index (SPX) has hit lower lows on a steady basis since reaching all-time highs back in early October, and is now down over 9%. A loss of 10% is considered a correction and a loss of 20% is considered a bear market.
For traders who bought into this market in early October, it may already fel like a bear market. Typically new highs bring in bullish investors that envision easy money. Just as typically, they do not sell when the market declines and are now in the uncomfortable position of having substantial losses.
Here is more bad news. The SPX closed Wednesday, November 21, right at the final support level that has a chance to stop the selling. The first two supports, at SPX 1473 and then SPX 1449, did little to halt the carnage.
Should support at SPX 1414 fail, we will be looking for a decline to “at least” the August correction lows, at the SPX 1370 level, 3.2% lower.
The charts are setting off alarms left and right. The S&P Composite Index is well below its 200-day moving average, a bearish indicator that is now acting as a strong resistance level. The Nasdaq 100 Index – NDX is still above its 200-day average, but has lost 10.4%.
The NDX has its own support level to watch. NDX 1971 is critical support for this volatile index and if it fails it will forecast a decline to at least NDX 1698 in coming days.
Kollar’s research has shown that the financial markets are in tradable trends approximately 80 percent of the time. FibTimer strategies define trends and trade them in both advancing and declining markets. Caring nothing about what newscasters say or what the latest economic indicator predicts, trends are where the profits are, and that is where FibTimer is.
Kollar is editor and chief analyst at FibTimer.com (http://www.fibtimer.com) which offers market timing strategies for S&P and Nasdaq index fund traders, as well as bond, gold, small cap, sector, ETF and stock trading strategies.
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