Erin Swenlin's Blog

The market is now consolidating in a slowly rising positive trend channel. Indicators are moving sideways so there is no telling when a breakdown or breakout of this channel might occur. For now we ride the trend up.

After weeks of advancing slowly, the market finally had a small short-term breakdown yesterday. Today, however was the 'real deal' breakdown we have been waiting for. Looking at the 10-minute bar chart we see that price was down immediately on the open, following suit with European markets that had opened low earlier and were preparing to close down over 1.8%. Trading after that was mostly sideways, likely digesting the opening drop.

The market is trading sideways along horizontal resistance at the October high. Indicators are barely changed, providing little insight. Upcoming news from Europe among other reports being released tomorrow could be holding investors back. As we've seen in the recent past, headlines can have a very negative or very positive effect on the market, so we need to be prepared for the weather ahead by considering tight stops on investments or just laying low.

Today we officially moved from a long-term bear market to a long-term bull market with the Long-Term Trend Model BUY signal. Short-term indicators have turned up and while some may be near overbought territory, all of them have room to rise higher before becoming dangerously overbought.

It appears that Santa Claus has already come to town, bringing with him a nice rally off of the mid-December low. The S&P 500 opened up and stayed up until the close. The NASDAQ recovered today from its major price decline yesterday as many of the tech stocks that got hammered yesterday probably benefited from some bargain-hunters today.

It appeared the market was going to rally but it quickly faded. It hit a tipping point at the end of the day on more mixed news out of Europe, and fell off the cliff following the FOMC statement that the economy was sluggish and no easing was on the horizon.

The markets traded mostly sideways today as yesterday's leap up was still being consolidated. This is allowing oversold conditions to continue to unwind and clear.

It looked as though the market was going to follow through on the bear market this morning or at the very least consolidate. When prices began to descend after the midday top, somebody initiated a buying program on news, squeezing the shorts before the market fell apart.

Wednesday finally marked the official move from a bull market to a bear market as the 50-EMA crossed below the 200-EMA. Unofficially we have been applying bear market rules for the past few weeks when the steep decline began and our intermediate-term NEUTRAL signal was generated.

I don't see today and yesterday as the beginning of a crash. Today was a continuation of a correction that began last week when the market broke down below support in the positive trend channel it had been in for weeks. Here are a few charts that I think support this hypothesis.