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Amateur Investors Weekend Stock Market Analysis (1/23/10)

http://www.amateur-investor.net/Weekend_Market_Analysis_Jan_23_10.htm

The market finally came under some selling pressure this week as investors had become very complacent over the past month. The 5 Day Average of the Put to Call Ratio dropped to a 3 year low right (point A) before the sell off began. Meanwhile also notice since the March 2009 low each time a pullback has occurred it ended as the 5 Day Average of the Put to Call Ratio rose back to the 1.0 level (points B). Currently the 5 Day Average of the Put to Call Ratio is still well below the 1.0 level so the market could still go even lower as a correction occurs.



Meanwhile since July the Dow has been holding support at or above its 10 Week EMA (blue line) as it has been trending higher however that support area was broken solidly to the downside this week. It's possible we will see an oversold bounce develop next week as the Dow may find initial support at its 20 Week EMA (green line) near 10090.



Of course the question is has the Dow completed an ABC corrective rally and put in a significant top? At this point nobody knows the answer to that question. If the Dow were to drop below its 20 Week EMA then the next support level to watch appears to be around 9735 which is along the 40 Week EMA (blue line) and aligns with the 23.6% Retrace calculated from the March 2009 low to the most recent high.



Finally as I mentioned last weekend the longer term upward trend line (black line) in the Dow connecting the 1932 low with the 1982 low would eventually come into play near the 6000 level if the C Wave ends up being an elongated affair much like occurred from the late 1930's through the early 1940's.