Market Weekly Review: March 7, 2009

This is my first post in over a month. I have finally settled in my new place and will get back into the game gradually. I'll start by introducing this market weekly review which I intend to do on a weekly basis.

S&P500 was holding on to the 800 level when I left (Jan 30), now it's struggling to keep 670. Needless to say, the month of February has been yet another bloodbath in the markets. Long story short, let's dive straight into the analysis.

As evident in Figure 1, we have started a nosedive since breaking below 800. Of special note is that the weekly volume has been increasing very orderly as we're moving downward.

From Figure 2, we are approaching the bottom of the downward channel which I've charted back in January. At the time, I thought we'd be breaking higher, not lower. Incredibly though, I did say that if we break below 830, we'll be seeing 750. That was pretty much what happened near the end of February. So using this channel again, it's obvious that if we don't hold this 680 level, 600 would be the next target.

In addition to the gloomy picture of Figure 1 as discussed, Figure 3 shows the VIX as we broke below 700 this week. This is yet another bad picture we're seeing. The VIX has been holding well below 50 even when we have broken below this critical level. This can mean that there's still no panic yet. Coupling this with the price/volume picture of Figure 1, I'd say this recent down draft is a measured selloff rather than panic selling. Technically, we won't be getting any decent rally until emotions have peaked on the way down. So my estimate for now is that we'll be heading lower still.

On the other hand, my directional guess has never been any good. But my pivot and target estimates are. So I'll say this here, if we go below 680, 600 is my conservative target. If we can hold this level, 750 to 800 looks like a good congestion zone to revisit.

[caption id="attachment_1093" align="aligncenter" width="500" caption="S&P 500"]S&P 500[/caption]

[caption id="attachment_1094" align="aligncenter" width="500" caption="S&P 500"]S&P 500[/caption]

[caption id="attachment_1095" align="aligncenter" width="500" caption="CBOE Volatility Index"]CBOE Volatility Index[/caption]