This was an interesting week in the Markets. Most of the major indices broke above their 50-day moving averages, only to come back down.
It won’t take much to throw a scare into the markets at this point in time. Consumer confidence and retail investor sentiment are both incredibly bearish – which is actually a bullish sign for most sophisticated investors.
The chart below shows a monthly view of the S&P 500 with an interesting look at RSI. I found it at Headline Charts, which is another blog I enjoy reading.
This is what intermediate bottoms are made from. As the panic builds this time, realize that the weakest holders have already sold. There may be a panic spike coming; but the downward momentum isn’t as strong. This is where positive divergences start to show-up. And each time this level holds it becomes stronger support. The trick here, of course, is for that level to hold.
What, Me Worry? According to the NYTimes, the White House is seeking new Fed power to keep markets stable. On Monday, the Bush administration plans to propose broad new authority for the Federal Reserve to oversee market stability, possibly exposing Wall Street firms to greater scrutiny, but avoiding a call for tighter regulation. Is that supposed to make the markets feel better?