The DOW broke down out of the recent Bull Flag this week.  The index closed at 9972 on Friday 10/23 and settled at 9713 this week for a 259 point drop.  The lower trend line held and the 50 day SMA seems to also be acting as support.  This may be nothing more than a simple pullback.  It is interesting to note that  all of the doomsday people come out of the woodwork on any kind of a correction.  The fact is, we have had three pullbacks since August and this one is not any more excessive than those.  Not to say that we will not continue the bearish move, however, I need additional confirmation.  A break of the lower trend line and a solid break of the 50 SMA on increased volume would convince me that this recent move is more than profit taking.  I think we will have a bounce this coming week, but we shall see.

The SPX has broken the lower trend line from last week.  I have redrawn another lower line this week that has three solid touches.  We must respect the trend line break as well as the break of the 50 day SMA.  The volume on the move this past week was not remarkable, so I will also need confirmation of the likelihood of a continuing move to the downside.  I feel that we will get a bounce this week in the index.

The COMPQ is currently testing the swing low from 10/2 at 2041.  There is some confluence from the swing high from 8/28.   The index clearly broke the lower trend line of the channel as well as the 50 SMA.  However, the volume was not convincing.  I feel that the double bottom may slow the move. 

Earnings season has been good for the most part.  We have a lot of economic news coming this week which could move the markets.  Stay on your toes and don’t fight the tape.  Robin

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