Growling Bears
I just finished yet another appearance on CNBC Asia's Cash Flow. I was joking with the anchor that I was going to earn the nickname "Bearish Brandon" if I keep appearing with downside outlooks on the economy. On today's program, they were looking back as this is the "unofficial" anniversary of the beginning of the credit bubble burst. I was asked to share my opinion on where I saw the bottom of the markets being and when that may occur.
I still see a downside to the global economy and do not feel we have reached the bottom of the markets yet. Looking at the nice rally we had yesterday in the US markets, coupled with the "dovish" comments by the Fed, you would think the bearish moves are over. You would be wrong. Another guest during my segment commented that there has been a rise in PRIME delinquencies, not just subprime! We have not seen the end of the financial sector write downs. Well, onto the indexes.
The Dow made a nice run Tuesday but closed just at a resistance line. It was the 38.2% retracement from the bull move that began in 2003 and ended in 2007, viewed on a weekly chart. Had we made a significant close above this level, I would have been more bullish. It is still in a bearish channel to the downside and has the next support level at about 10,000 which it should reach in early 2009.
The S&P 500 is also showing the bearish trend well intact. It too fell short of the 38.2% retracement level which is being used as resistance currently. On the chart, I am showing a downward channel and targets based on Fibonacci projections matching the areas of retracements at approximately, 1100, or 990 to 1000. I see the S&P bottoming in early 2009 as well.
Finally, turning to techs, the NASDAQ has shown a little more strength. This is largely due to the biotech sector holding strong while the markets are falling. (We all want to find the medicinal cure for the market headache right?) The NASDAQ is using the 40 week moving average (same as 200 day) as resistance and the 38.2% retracement from the October highs as support. Something has to give. With the rest of the markets falling and the economy slumping, my money is on the support failing. I have downside targets of approximately 1985 and 1800. Both levels have acted as strong support in the past.
So the bear is still growling loudly and will continue. Be sure to position your portfolio accordingly. This is Bearish Brandon signing out for now!
Until next time, may your trades be green and your losses small!
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A member of the Market Technicians Association, the Chartered Financial Analyst Institute, and now holding the Chartered Market Technician Designation, Brandon has appeared as a guest on CNBC Asia's Cash Flow and conducted special seminars for CNBC staff on technical analysis. He has published articles in The Trader's Journal Magazine and was interviewed in Share Investor Magazine. Brandon was also an industry expert speaker at the Asia Traders and Investors Conference 2008. As a former stockbroker, brokerage trader, and hedge fund trader, Brandon brings various market views and insight to his trading classes and lectures. A wealth of knowledge, he has held NASD securities series 7 and 63 licenses. An Online Trading Academy graduate himself in 1998, Brandon has been trading equities, options, forex, and futures in his own account since.