Sunday, December 21, 2008

The Rally is at Risk

Generally speaking, in an intermediate term trend a good place to add to or enter positions is the 50 dma and that appears to be whats going on right now. Stocks are both in a long and intermediate term downtrend and sellers are stepping up here at the 50 day moving averages. After breaking through these levels on the Fed announcement last week, the S&P, Dow and Q's have since slipped back below their 50 dmas. Only the Russel 2000 (IWM) managed to hold above as stocks closed Friday. Now I'd like to give the benefit of the doubt to the leading index (R2K) so I am hoping (and betting with IWM calls) that the rally will continue with a strong push above the 50 dma's next week. Hopefully the bulls will get organized and take advantage of the low volume, holiday shortened week to stage an attack on the bears. However, the fact remains that stocks continue to be in an intermediate term downtrend and the 50 dmas have placed this bear market rally at risk.

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