Falling Dollar, Rising Oil Lead to Heavy Sell Off

DJIA - 394.64, -3.13% SP500 - 43.37, -3.09% NASDAQ Comp. - 75.38, -2.96% Russell 2000 - 22.73, -3.00% Oil closed at $138.54 up $10.75 A falling dollar, surging oil prices and a jump in the unemployment rate created a selling spree that sent most stocks lower on Friday. On the NYSE decliners led advancers 2.584 to 564 and on the Nasdaq decliners 2,343 led advancers 548. This was definitely a broad based sell off. Which is a good thing for traders who where watching the charts and prepared for this move to the downside. This sell off was consistent with the concerns we posted last Friday before heading offshore. The DJIA reached its double top price target of 12,294 on Friday; we specifically mentioned the 12,294 target in our May 21 post. Can the chart really give us insight into future technical action of the market and stocks? Anyone who has followed our analysis for any time knows we have been extracting forecasts and outlooks just like this one for a long time. Do we know the future? Absolutely not! Can technical analysis give a trader insight into a probable outcome and price target? It has once again. The DJIA is trading below its 20, 30, 50 and 200 DMA and is at its March 31 horizontal support level. The S&P, as of Friday, is trading below its 20, 30, 50 and 200 DMA and is clearly coming off of lower highs and forming lower lows. If Friday’s break below 1,370 holds, look for a target of 1,334, in the area of mid April horizontal support. The Nasdaq which had a new high close and a close above its 200 DMA on Thursday is in a chart pattern which is a potential double top. The Nasdaq managed to close below it 200, 30 and 20 DMA on Friday. It has continued to be in an uptrend but the sell off on Friday in addition to breaking below the moving averages is also forming a bearish divergence in the 2-line MACD and the MACD histogram. Technically, the Nasdaq, still in an uptrend, is clearly finding sellers in the area of the 200 DMA once again. The Russell also still in an uptrend broke through resistance on Thursday with its highest close since December 31 fell back below the 750 horizontal resistance area and its 200 DMA. It continues to trade above its 20, 30 and 50 DMA. Friday’s Action Moving Up: USO, IPI, MEE, BTU, DXD, DOG Moving Down: BIDU, MA, SOHU, GS, STRA, CF, DECK, DRYS, PCLN, CLF, FSLR, RIMM, AMZN, AAPL, MS, V, ESRX, IBM, X, MON, NUE, NKE, POT, CELG, MER, MTL, LEH, FWLT, UAUA, BRCM, GRMN, CNX, EXPE, MOS, SBUX, JASO, EBAY, SCHN, AGU Intermediate Term Market Trend: Down (DJIA, S&P) Short Term Market Trend: Down