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Outlook 26 September

Posted by Dan on September 26, 2011

A dramatic drop reversed all of the recent gains in most stock indices.
This means our sign of strength is negated and we have to watch out below.
There is no reason for panic however, since we are still holding support provided by the August lows.

Here is the current chart for the S&P index (click for larger image):

S&P

We have almost a week of lunar Green Period to go, so I think the market will try to recover from last week’s losses.
How much of recovery we get will quite important with the next Red Period coming up. If we only get weak upside action this week, then we will be only just above the major support levels going into the next Red Period. That would increase the odds of dropping to a new low in early October.
So, I would sell any drop below 1100 on the S&P.
And if upside action is weak then I would buy some protection for my portfolio by Thursday or Friday. The risk for a further drop is too high.
I do think we are approaching a major bottom, because market mood seems to be getting very negative.
The next Red Period may provide us a good buying opportunity.

Danny

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