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   Mentor Posted On: 3/7/2007 6:41:03 PM
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Member Picture Market Commentary for March 7th, 2007
All three major indices, after flirting with the flat line, closed lower today, and most of the action came within the last hour of trading. Dow lost 15 points, Nasdaq closed down by 10.50 and the S&P 500 lost close to 3 and 1/2 points. If you listen to CNBC and the so-called experts, giving us all the reasons in the world as to WHY the market closed lower, then you will truly believe that this drop in the overall markets is due to the fundamentals changing. The truth is that the bounce we had yesterday was nothing more than a technical bounce due to oversold conditions. The volume was extremely light, and thus making this bounce just what it was - a bounce.

Looking at the DOW daily chart, here is what I think is happening here. Of course this opinion is not set in stone and tomorrow's action may very well change it. Let's not forget, the market conditions and actions on a daily basis change the overall short-term direction which way this market is going. Let's look at this chart:

Dow Jones Industrial Average Chart


Looking at this chart, I believe that the sideways movement, with the bounce moving up to about 12400 or so (between the 38 and 50% retracement level on the Fibonacci retracement - also known as the confluence), before continuing it's down drift to about 11800 or so. In order for this to happen however, the DOW has to break the low of 12039 with more than 300 million shares - not on the NYSE, but the DOW cumulative volume.

The Nasdaq has a similar story. It should go sideways or maybe a bounce to about 2425 or so, and then watch for a pullback to test the lows it established on 3/5/2007. Watch the volume on the NASDAQ as it approaches these levels. Any violation of these lows with more than 2.3 billion shares could spell trouble for this index with the possible target being the the 2230-ish which also corresponds with the breakout back on 10/04/2006. (See the maroon arrow on the chart).

Nasdaq Composite Chart as of 3-7-2007


The S&P 500 looks to be on the same boat as the other two charts above. If it fails to move higher, you should look keep in mind the 10/04/2006 move up as it is represented by the maroon chart. Keep in mind that the drop to those levels is quite possible.

S& P 500 Chart as of 3-7-2007


Comments or questions are welcome!