I was expecting a market technical rebound last week as I saw that many indicators were oversold. However, that did not happen. The market turned very bearish after negative news broke out from mortgage financiers Fannie Mae and Freddie Mac.
Let’s examine the technical analysis of Dow Jones & S&P500 again!
I draw the fibonacci lines using the low in 2002 (Beginning of the bull market) and the high at end 2007 (End of Bull market) on both Dow Jones & S&P500. We see that the market broke the 38.2% fibo support line in June and it continued to head south.
The next support level is the 50% fibo line. Remember, in a bearish market, all support can easily break, so, I foresee that 50% fibo support may not hold and it can head down to the 61.8% support.
Why do I say that?
In my analysis last week, based on history, all bear market can correct down by as much as 30% . So, I was looking at Dow Jones testing the 10,000 level which is near the 61.8% fibo support line. That’s how I see the market movement now.
Frankly, see the market diving down further and further, I am very very tempting to open short position now. However, the risk is pretty high because the market can have short term rebound any time, I do not know when as the technical indicator is showing oversold market now.
If I rush in to open short position can, I can easily become charcoal like a burnt fish. I really must tell myself to be patient and wait for a rebound to 20d MA before taking any action. That’s how I am training my own market emotion and psychology now.
Fed chairman is giving some economics update to the congress and senate today. Let’s hold on to see how the market will react now!
DISCLAIMER: This information is used for learning purposes only. It does not constitute an offer or solicitation to buy or sell. You should do your own analysis on top of my postings.
