My Near-term Technical View

Talk about a party spoiler. If you believe David Rosenberg, chief economist at Gluskin Sheff, the worst is yet to come, as he suggested in a morning note. He suggests that there will be no returns for up to a decade. Kind of scary but there is a lot of clout here, as Rosenberg is highly regarded for his vie.
Markets continue to maintain a negative bias, with a decline in 14 of the last 21 sessions. It’s not time to celebrate, but markets did manage to edge higher for the second straight day last Thursday for the first time in over a month. Hard to believe, yet that’s the way it has been. The CBOE Volatility Index (VIX) is just below 30, an indication of reduced fear; but, as all know, this market is all about headlines and uncertainty.Technically, the NASDAQ and Russell 2000 are both above their respective 200-day moving average (MA). The DOW and S&P 500 are just off their 200-day MAs of 10,295 and 1,106, respectively.The near-term technical picture has been strengthening, but only the NASDAQ has rebounded to neutral; while the other indices remain moderately bearish.Investor sentiment is bullish on the NYSE and turned bullish on the NASDAQ last Thursday for the first time since May 18. What is important will be if markets can hold on to the gains in the upcoming sessions. So far, the markets have been able to rally after dips and hold around the key 200-day MA, which is positive.

As we move towards the midway point of the year, only the Russell 2000 and NASDAQ are positive. The DOW and S&P 500 are down in 2010. I’m not that optimistic about the near-term upside of markets given the potential ramifications of the debt and growth issues in Europe and potential asset bubble in China. The encouraging sign is that the markets have been able to hold near the 200-day MA, which I view as positive.

My near-term technical assessment is as follows:


The near-term technical picture is neutral on weak Relative Strength (RS), so there could be more downside weakness or mixed trading in the near term. Market breadth is trending down.

The NASDAQ is hovering around 2,300, but struggling to hold. The near-term target is the 50-day MA of 2,393. Failure to break higher could see a move back down to its 20-day MA at below 2,300.


The near-term technical picture for the DOW is moderately bearish on weak RS, so there could be more downside moves in the near term. The DOW is below its 20-day MA of 10,403, 50-day MA of 10,776, and 200-day MA of 10,289. Watch for support at 10,000, along with the pivot points at 9,758 and 9,622.

S&P 500

In the broader market, the near-term technical signals for the S&P 500 are moderately bearish, with weak RS. The S&P 500 is below its 20-day MA of 1,113 and its 50-day MA of 1,159. The index is around its 200-day MA of 1,105. Crucial support is at the key levels
of 1,054 and 1,027.


The Russell 2000 has been the only index of the four I cover that is holding in positive territory.

The near-term picture for the Russell 2000 is bearish, with weak RS. The index is around its 20-day MA of 669, but below its 50-day MA of 692. The 200-day MA is at 632.

In all, until the bias improves, the charts are indicating more potential weakness or sideways trading in the near term. In my view, the market remains dangerous and vulnerable to downside moves.