Where are these oversold indices headed, and where are the buying opportunities? Our Weekly Wizards weigh in...
Jack Steiman, author of SwingTradeOnline.com (www.swingtradeonline.com), sees the S&P 500 holding a critical support level, at least short-term:
The S&P 500 is unlikely to break 741 except a possible breach intraday on this try. We have made enough attempts to break it and it usually but not always takes at least three major efforts by the bears to break things. It took five tries by the bears to take 805 so it seems unlikely we'll make it through 741 on this the second time down. First, to get there, we have to lose 775. The bulls know the possible ramifications of such a loss. They don't want to see the market anywhere near 741 so they should try and defend 775. If 775 does go on a close then you have to start preparing for the longer possibilities should 741 go away with some force. We'd likely be entering a Nikkei situation which means a longer term secular bear market for the S&P 500 and Dow which would mean they're finally joining the Nasdaq in its already 9-year old secular bear. Of course nothing is etched in stone. The market may find a way to hold 775 here, but in the days and weeks ahead I kind of doubt it. However, I don't expect 741 to break on the next test. I would then expect the next countertrend rally to hold us up a while longer before a third and likely fatal test occurs. The next bounce off 741 could be quite decent.
The real problem technically for the bulls is this. Keep in mind that we moved laterally in those triangles for four months.
Quite a long time. When a break comes one way or the other, it usually holds and is usually done with a gap. That's exactly what took place here. We had those major gap and runs Tuesday that saw some terrific losses across the board.
1510 was the trend line on the Nasday, yet they opened the Nas at 1490. A huge gap below the bottom. Same took place on the other major indexes. These gap down levels, decently below the triangle breakdowns, will be very tough resistance on any rally attempt here, and that's why Wednesday was so weak. Just too much overhead for the bulls to deal with.
This is what makes a move to 775 likely and a break of it likely as well. These long-term triangles set the tone. The market decided that down was the way. Hard to imagine there isn't more damage before we get some type of counter trend bounce. Time will tell but I favor a move below 775 in time before we can get back in to those triangles.
Mike Paulenoff, author of MPTrader.com (www.mptrader.com), sees gold as the continued big winner in this market:
Remarkably and impressively, the SPDR Gold Trust (NYSE: GLD) continues to accelerate to the upside ABOVE the upper channel resistance line at 95.60 on the way to 98.00 next -- in a NORMAL market. Those of you who have experienced an abnormal gold and silver market fully realize that anything can happen when gold and silver go into panic mode, and if any time in my career the fundamentals suggest that "panic mode" could in fact be directly ahead, it is now.
Why now? This is the ONLY time in my career that my perception is such that deflation really is a potentially devastating problem -- so much so that the world's governments actually desire higher gold prices to help re-flate an otherwise depressed and recalcitrant consumer amidst a global consumption "strike". If goods are perceived to get more expensive, then perhaps psychology will shift to "buy now because it will be more expensive later."
To get that to happen, how high does gold have to climb? I have no idea, but it could be much higher than anyone imagines, especially with the institutions (non-gov't and gov't) "friendly" to gold's rise, and in the absence of central bank sales. In any case, my sense is that the story is there, and the first test will be gold confronting $1000-$1030 and the GLD at 100.00/30.
Harry Boxer, author of TheTechTrader.com (www.thetechtrader.com), selected TeleCommunication Systems (TSYS) Wednesday after the close as his Chart of the Day:
TSYS in this market is acting spectacularly, making new multi-year highs. It has broken out, backed and filled, consolidated, and on Wednesday popped again on 1.35 million, reaching as high as 9.93, closing with a gain of 63 cents. That's the highest it's been in nine years, and it's come out of a long base that can support a huge move. The technicals are surging, with both the On Balance Volume and Money Stream near the highs for the window on a daily and weekly chart, as bullish as it gets. This is a stock that is trending higher and looks like it wants to move higher despite market conditions, and certainly a stock that could do extremely well if we get any kind of intermediate rally whatsoever.
The trendlines show the top of the channel up around the 15 level, my intermediate target, with a short-term target around the 12 area. Short-term support are at the lows of last week, at the pullback around low around the 8 1/4 area. I certainly don't want it to get any lower than 8, but am hopeful it can extend right from here, at least to that 11 1/2-12 zone short-term, and perhaps much further.
See Harry's Chart of the Day Video Analysis on TSYS.
(http://www.thetechtrader.com/info/charts/index.php?id=318)
Gary Dean, author of MarketsPath.com (www.marketspath.com), sees a countertrend rally coming shortly:
We have options expiration Friday and we often see some wild swings. If we see early weakness, I still believe we need to look for landing areas to get long. I know the short side seems like the easy trade, but I am seeing some signs of a massive move to the upside. When something doesn't look right and risk moves up, we tighten stops see what plays out.
The tape has been difficult lately and that often happens at tops/bottoms, because we move into a chop zone period. If the bulls can break out to the upside, we should have a nice move higher, where my targets are 840/870 for the spx. If the chop zone ends with a break to the downside, we step away and look for the next area to try the long side again.
The tough part about getting in on the short side is all our indicators are showing buy signals. When the move lower happens, it is often very fast or in a gap down type move. The risk of just riding the short side out is the buy signals kick into gear and we see a 10% move higher. With the buy signals in place for most of the charts, I would rather look for areas to get long down here via the ultra index ETFs -- Ultra S&P500 ProShares (NYSE: SSO), Ultra QQQ ProShares (NYSE: QLD), and Ultra Dow30 ProShares (NYSE: DDM). But we need to be careful and cautious when choosing our spots to get long. I believe the move up when it starts, could take the indexes much higher than some are anticipating.
