Tags: market | Nasdaq | Russell 2000 | traders

MarketWatch's Little: Wolves Gathering at the Market's Door

By    |   Thursday, 10 April 2014 01:31 PM

Wolves are circling the market, writes a professional money manager for MarketWatch.

Markets are finally dropping after 15 months of rising, but the selling may be only just the beginning, cautions technical analyst L.A. Little.

"The big bad wolf is readying for lunch, and it appears his wolf calls have attracted the rest of the pack. After roughly 15 months of 'up,' they look to be quite hungry."

Low points, or swing lows, have been lower and lower, an ominous sign for the market's outlook.

Just look at the Russell 2000, the proverbial canary in the equities coal mine, that broke another swing-point low on Monday, he says.

Plenty of traders are underwater in the Russell 2000 as well as the Nasdaq, and they'll be happy just to break even when they get a chance.

A bounce is expected, he says. But how much of a bounce?

"Too much damage has been done, and now there is a lot of overhead supply in the Nasdaq, NDX and the Russell. If and when the S&P begins to take out those multiple swing-point lows, we are most likely going to see a swarm of selling come in again."

Support and reminiscence levels provide a good guide to the market's next move, writes Deron Wagner, founder of Morpheus Trading Group, for Investing.com.

Wagner uses data from the ETF PowerShares QQQ to gauge the Nasdaq's outlook.

"In a bull market, a 'normal' and healthy pullback from the highs typically is in the 5-10 percent range," he writes. "Therefore, if QQQ slides more than 10 percent below its March 2014 highs, price action in the Nasdaq could become quite negative for at least the next several months."

The ETF has been on a long-term trend upward the last five years, so watch that uptrend line closely. Its breakdown could indicate a new bear market for the Nasdaq, he adds.

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Wolves are circling the market, writes a professional money manager for MarketWatch.
market, Nasdaq, Russell 2000, traders
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2014-31-10
Thursday, 10 April 2014 01:31 PM
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