A market breakdown could be forming
The markets finally
broke down on Monday on very hard selling. The noodles (Nasdaq 100
March 2006 e-minis) closed 12 points under the daily upper Bollinger bands. Note
that its rare to have a market close under the daily Bollinger bands on the
noodles. This morning the noodles sit at 1682. Normally we expect that 1682 to
break and base for a rally back to the daily 5’s to reject and then continue to
channel widen with a downtrend. However, this morning we had such a hard time
even getting back through 1682 and this is troubling for the market.
Although the daily 5 period moving averages on
the noodles sit at 1701.50, the reality is the longer we don’t rise on the
noodles the lower that daily 5 resistance’s will. The weekly
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stochastics have peaked out with a channel tightening 15 period ma support at 40
which equates another 20pts downside on the noodles to 1658 level which is the
daily 50 period moving average support. This is the next downside level on the
noodles.
Continue to watch the daily 5 period moving
averages as they will drop lower in the coming days. Shorts off that level can
be used for some swing trades as the overall market should see selling to test
the noodles daily 50 period moving averages. Be very careful holding long
positions too long intraday. Good trading gang!
Jea Yu
Feel free to send any questions or comments to
jay@undergroundtrader.com
Jea Yu has been involved with
the equities markets for over 10-years. He specializes with intraday trading in
the U.S. equities and futures markets. To receive a free 7 day trial to Jea
Yu’s Underground Trading Pit,
click here or call 888.484.8220, ext. 1.