Undoubtedly, after Friday's action, the momentum lies with the bears now. I thought it would be interesting to find out what the charts are saying and the next important support levels for the bulls. How the market deals with these support levels is important as a free fall through these levels would suggest that all bets are off whereas support at these levels would imply that we are still trading in a broad range.
The S&P first. First thing that stands out is the bearish volume pattern. You can see relatively higher volume on the down days compared to the up days. We are below all the major moving averages and a bearish MACD crossover is imminent. All said and done, not much to cheer for the bulls here. The next support I see is at the 1060 level and then of course comes the big one, 1040.
Nasdaq has a similar story to tell. The next support level is 2140.
Of course, all the above analysis takes a back seat to the earnings reports coming out next week. We went down on earnings on Friday and it will pretty much be earnings that will determine the action next week too. I have added what I think is a pretty nice link for an earnings calendar on top of the page. Be sure to check the reporting date for any position you are considering to take before you get in. But as the above charts show, the momentum definitely lies with the bears now. I know I stated this in the blog a couple of times even last week but I feel compelled to state it again here - Do not trade the news but the reaction to the news! Do not blindly jump into a stock just because it beat the estimates and raised its forecasts. Instead, see how the market is reacting to this news. If the stock is getting beaten down inspite of what you think is, and might even be, great news, do not try and swim against the current. Remember, the market doesn't need a reason for what it does. It is always right. That's all.
Take care and good luck!