It was another down week for the markets as it was also another options expiration week. Both the Dow Industrials and the S&P 500 traced out 50% retracements of their respective lows on July 2nd to the tops on August 9th. So is this the end of the pullback or will the downturn continue? I still contend that the DJIA has unfinished business in the 9000s but it could also go up one more time before completing this business. If the market can rally off the low it made today (Friday) it may have more to go. If the .50 retrace and today's low get taken out then we can expect more down. The key is watching the action Monday for clues. One past clue is that the market rose more than .618 when it topped a couple weeks ago at 10719.94 and then dropped. (See the lime green oval in the first chart below). Usually when a fib is exceeded the market should move to the next fib but that doesn't mean it can't pullback, like it did during these past couple of weeks, before moving back up. The bounce off the .50 was anything but convincing so the best thing to do is wait and see.
The Fibanacci Landscape In The Dow Industrials:
Bottom Line: I am convinced we will hit that 9440 number or perhaps even lower very soon. The places where the DOW has bottomed over the past few months on the latter chart has little significance and sooner or later those lows will be taken out. Exactly when this will happen I am not sure. With the volatile months of September and October on the horizon I would watch any up move for an opportunity to short or buy DJX puts. Could this down move of the last two weeks be the beginning of the journey down? It is possible. Each day will carry more clues. If you are long this market - be vigilant!
Stocks I am watching:
RIMM, INTU, FDX, and NFLX
