FuturesBlog.com – Emini and Futures Market Analysis by Chuck Kowalski

This Is One Ugly Chart

Posted on May 20, 2010 by Chuck Kowalski

The market is really looking bad.  Many are still in denial that the market can actually go down.  It reminds me of when the Internet bubble popped.  The bulls were so brainwashed that they couldn’t believe the market wouldn’t bounce back after relentless selling.  The technical picture looks so bad that I have to believe the stock markets will move even lower.

The daily chart shows massive liquidation.  The low from May 6^th looks like it will be tested.  There is a good chance it will break.  I have seen this pattern too many times.  The market might hold that area for a while but the odds are that it will eventually continue lower. 

The rosy economic picture that the boys on Wall Street have been painting is now withering away.  There is no way that our economy is going to grow at 3 plus percent over the next few years without the printing presses working overtime. We either have to accept lower to no growth and get our financial house in order or the repercussions will only be greater next time around. 

Looking at the weekly chart, I would expect the S&P to eventually move down to the 880-900 level to retest the downtrend line from the 2007 high.  There is also a 62 percent retracement around this level.   There is no doubt the market will be volatile and we will probably see more spike reversals.  However, the trend and sentiment has shifted downward and that is the path of least resistance.