This is a follow-up market update to show beginning investors and traders that trading does not have to be complicated.  Two, days ago I speculated that the market bias was to the downside, and, indeed, the last two sessions the market has moved lower. The question is where do we go from here.   

As can be seen from the candlestick charts below (stock charts courtesy VectorVest), all the indices dropped, but the SPX and DOW were down less than 1%. Technology was hardest hit with the NASDAQ down 1.2%.  For the technical analyst, the charts are interesting. The SPX is at its 50 day moving average, while the NASDAQ dropped below its 50 day moving average, but is at a prior support level. The DOW alone has further to drop before hitting its 50 day moving average. So, what’s one to do? When in doubt, look for the answer from Mr. Market himself.  If tomorrow the SPX and NASDAQ drop below their respective support levels, there will be further downside – but, it is yet possible that they may bounce off their support.  

SPX at its 50 day moving average

NASDAQ at a support level

DOW has further to drop to 50 day moving average

THE STOCK OPTIONS TRADER’S OBSERVATIONS   

One of the investing doctrines attributed to Warren Buffett, The Oracle of Omaha,  is …

“Buy when everyone is selling” and,

“Big opportunities come infrequently. When it’s raining gold, reach for a bucket, not a thimble.”

So, if there are two sides to each trade, a buyer and a seller, the question is – with all the current selling – who is buying?

Tomorrow (expiration Friday for the April monthly options) should prove to be an interesting day with a lot of volatility in the market. The near-term risk is still to the downside, however, we are in earnings seasons, and a few good earning reports or bullish guidance can change the market sentiment rapidly.

Happy Trading!