A Technical View of The Stock Market from The South

October 30, 2008
Dow-9,079


In addition to being a foodie, I am also a retired stock broker, securities analyst and technical market analyst. So from time to time I will favor you with my thoughts on the stock market. These days everyone has some involvement with the financial markets and it is on most peoples minds.

A few weeks ago I wrote that the market was over-sold and I anticipated a bear market rally. What happened after that note was a 900 point gain which stopped abruptly at the 13 day moving average. (this moving average is a smoothed out version of the market's price, tends to be volatile when compared to a 50 day or 200 day moving average and represents a resistance point.)

Subsequent to that gain, the market backed down and then made another attempt to pass the 13 day moving average. This attempt also failed and the Dow again backed off.

This week, a third attempt has so far been successful but not yet in a meaningful way. If the Dow is truly able to sustain a price level above the 13 day moving average it would mean passing a significant resistance level which has vexed the market since May. Between July and October the 13 day moving average was surmounted numerous times, and each time the Dow backed off.

At this point, the market is still over-sold and all we can do here is hope for a non-failing rally that is strong enough to maintain a price level above the 13 day moving average. Looking further out, a true sustained rally would culminate in an attempt at the 50 day moving average which is at about 10,000. And then the drama of testing resistance, up and down, gets replayed at higher levels.

Joe
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