Technicals are definitely in play…

Stocks notched their sixth straight week of declines with the Dow Jones Industrial Average closing below the 12,000 level (chart) and the S&P 500 finishing below its 1275 support level (chart). In one of my most recent blogs, I eluded to the potential of the major indexes falling to their respective 200-day moving averages, and now it seems inevitable.  Furthermore, this will only require another 2% or so to the downside.

Should the key indexes test their 200-day moving averages, it is critical that this support zone holds for at least a few trading days. I would expect a pretty powerful bounce off of the 200-day, but what’s more important for me to see is that the indexes remain above this key support level for more than just a bounce. Then the 10% market correction at that point would be completed and this bull market could very well resume its uptrend.

I am anticipating a very volatile market next week from a technical standpoint and the fact that it is also quadruple witching. This is when both options and futures in four categories expire on Friday, which happens only four times a year and also has a history of adding to market volatility.

Have a great weekend 🙂