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Monday, January 26, 2009

Earnings Armeggedon

We took off early today, led by energy and financials, but dropped sharly midday as the financials staged a big reversal. Volume was just a bit below yesterday's, and even with the midday drop, you didn't get the feeling of heavy selling. We seem to have several important levels that are getting tested and retested. MACD is starting to turn again. MACD gives pretty decent signals in strongly trending markets, but tends to whipsaw during sideways trading. 804 is the recent low, as long as that holds we still have a chance at rallying, but the 50dma is going to be resistance here, and unless we can break through it, we are stuck in a range.

The financial sector reversed sharply today. Early it was co-leading up with energy, but it went negative in the afternoon and never recovered. the area between 9.5-10 is reisistance here, 8.07 is the new low. Downward momentum has slowed, but not stopped.

The Nasdaq has support at support at 1434, resistance at 1542, and a pivot at 1493. The 50dma might provide resistance here, although it has put up weak resistance in the recent past. MACD is about to cross back up, and the relative strength line is still going back up. As long as the Nasdaq is outperforming, the market has an excellent chance of resuming an uptrend.

430 is the support on the Russell 2000, 460'ish the pivot, and 486 resistance. The 50dma is sitting right above the pivot, and we almost tested it today, but pulled back. The Russell is starting to underperform, which is usually not a good sign.

The Dow industrials got hammered with bad earnings from CAT, AXP, MCD, and PFE, but still managed to rally early, staying well above support at 7909, but not able to stay above 8197. The pivot is around 8260, and the boxes represent the trading ranges above and below the pivot.

The dow transports are awfully close to breaking the Novthis item ember low. Today's close was barely above yesterday's close, and today's low undercut yesterday's. I'll have to take a closer look at this to see what is going on, but this wasn't supposed to happen with lower oil prices.

While going through the news this morning, I came across this item on Bloomberg. What bothered me about it was the fact that too many people still believe it is "business as usual", that lower interest rates will fix everything, and that stopping home prices from dropping will reverse our economic slide. Until that changes, we are screwed.

I will have my new highs update shortly.

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