04 March 2007

Where Does It Stop?

Major support at the 1755 level in the NDX was broken late this week and as explicitly shown in Friday's trade, broken support tends to become major resistance. I suspect a drop into the 1700 level will be the next move as soon as Monday or Tuesday. Support there could be very strong as that would be where the index fell out of bed last May into the July lows around 1450. That initial drop from the April '06 highs (1750) to the first support (1550) was 200 points or 11.5%...using that as a guide, this initial drop from 1855 could have a ways to go before we consolidate. Perhaps as far down as the 50% Fib. retracement levels around 1650. That could be a scary drop so if your itching to go long as the market is tumbling I'd look to that level as entry and if it fails as a stop. On the flip side if you are short and looking for profit taking targets I would use those levels (1700 and 1650) as well. I don't want to be too sceptical but Tuesday's selling is money that was withdrawn from the system...IT IS NOT COMING BACK ANY TIME SOON...jfg.

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