Observations About the Current Market Trend - Part 2

On Friday 4/11 the dow tanked 256 points, nasdaq by 61, S&P 27. No doubt a very ugly picture. But I want to go back to something I mentioned from this past Wednesday's post. That is, the potential downside we may see but the potential bounce that may ensue from the strong "necktie" support that the indices are now right on top of. Observe the 3 indices chart once again:

DOW


Nasdaq


S&P



As the charts show, we are now right on the double necktie support - historically known for its resilience. We also have not had confirmation yet to the downside. Notice also despite the ugly move we had today, the volume was actually rather light. In the dow, nearly 1/3 of the volume came from the amazing selloff of GE. But the nasdaq and S&P were just collateral damage and felt more like profit taking rather than panic selling (as indicated by the VIX meter).

So Monday's indices close will be crucial. Even if the morning the markets gap down, if by the closing bell the indices retraces back to the necktie and closes above, it leads me to believe we will have a very strong rally coming.

However, if after Monday there is confirmation to the downside, then the markets may have a significant downside risk.

Time will tell. Good luck to all of us next week.

-DL

Disclosure:
I hold short positions on X, MA, RIMM
Long positions on AAPL, MOS, GRMN, GOOG