Nasdaq Nears Technical Support

From Chart of the Day:

The Nasdaq is currently down 14.5% (2483) since putting in a secondary peak 11 weeks ago. For some perspective on the current state of the stock market, today's chart presents the prevailing trend of the Nasdaq. As today's chart illustrates, the Nasdaq has been and continues to trade within its 17-month trend channel. However, the recent selloff has brought the Nasdaq down near support (green line) which is currently being tested.

Technical Observations

It will be a matter of time before the confirmation of the suspected head and shoulders formation is decided. Here is another perspective of what might be brewing, instead of an assertive move to the upside or downside. Pretend that history rhymes. Here is a chart from Chart of the Day showing the history of the DJIA over select periods, immediately following two "massive bear markets", defined as a decline of 50% or more. The third line shows the DJIA following the less than massive bear market that ended in 2002.

Waiting for a Signal

I described my bullish outlook recently in a previous post. The stock market is presenting what might be a nice entry point for cash right now. And it might be presenting an attractive bear trap. Here are a couple of charts that illustrate why I am not ready to commit to anything but cash until the market leads me to a conviction about what direction it wants to move in. First up is the S&P 500 Index candlestick with its 200 day moving average (200MA) line for reference, and underneath is volume for the index. The 200MA is the long term mean line.