What a week that was – Market lost more than 2000 points last week and it happened very fast. Monday was one of the many days we saw in recent months – some 250 points daily range with not much to do or say. Then Tuesday came with 715 points drop, Wednesday and Thursday were down days with bulls trying to push market higher and then Friday came and was similar to Tuesday, but this time Top40 dropped 920 points. Sell-off was broad based. On Thursday evening US markets had the most interesting trading session. Dow dropped 700 points in 15 minutes, just to recover 600 in following 20 minutes. At one stage DOW was down almost 1000 points and that was the biggest ever single-day point loss. So, after complaining about low volatility we had to bite the bullet and to live through extreme changes last week.
With such a drop in the week behind us, many important technical levels were broken and some trend lines too - Trend line from March 2009 was broken on Wednesday, 89sma on Tuesday and 200sma on Friday. That was first close below 200 simple moving average since May 18th, 2009.
Following weeks could bring us the test of 23072 low (made on February 5th, 2010) and maybe even test of 21600 (red line on chart) and that could prove to be crucial test. On the positive side we could go up and retest broken trend line around 25000. Relative strength index and Stochastic oscillator are oversold with MACD venturing deep into negative territory.
Please be very careful out there because volatility is very high, coming back into markets after many months of boring activity of going up slowly. ATR last week broke upwards and that is good for intraday and short term traders because they will make their points at much faster pace. Just be careful as one could lose points much faster too in markets like this.
Moving averages, which help us to determine long, medium and short-term trends:
- long-term (200sma) - DOWN
- intermediate (89sma) - DOWN
- short-term (10ema) - DOWN