Thursday, January 30, 2014
You can see that both the Dow and the S&P 500 are both below their 50 day moving averages (green lines). So two of these three indicators are below the 50 day moving average and this is pretty good evidence that the short to intermediate term trend is downward.
In such a situation the 50 day moving average itself is typically resistance for the first rally. Right now this is the 1812 level is the S&P and the 16,154 level in the Dow.
For the moment my downside target are the 200 day moving averages (red lines). For the Dow this is the 15,460 level and for the S&P the 1705 level. If the S&P reaches its target the Dow will probably stop below its 200 day moving average.
Needless to say, a drop which takes both these averages visibly below their 200 day moving averages would have very bearish implications and would probably mean that a bear market is underway. I would expect a bear market to drop the averages about 25% from their recent high points.