In late February, the Shanghai stock market reminded us how inter-related the world’s markets are when its 9% plunge reverberated around the world and concluded with the DOW closing down 400 points. The market recovery started once all three major market indexes (DOW, S&P 500 and NASDAQ) flirted with their 200 Day EMA.
The July/August credit induced correction ended in the same fashion. In that case the DOW was stubborn. It would take it an additional 14 days before it followed the S&P 500 below the dreaded 200 Day EMA.
If you recall leading up to the July correction the hot money was piling into the DOW stocks because of their international growth profiles. Technology has been the most recent bastion of safety in particularly the consumer electronic companies like Apple and Research in Motion. Last week they were taken out a shot to the tune of 12% and 10.8% respectively. The NASDAQ is now in sync with its brethren as it approaches its 200 Day EMA.
In each of the two past swoons, the MACD has served as our all clear signal. Once it turned around and crossed, we were on our road to recovery. If I were a betting man I would venture that this time won’t be any different.
Hey Santa, how about a MACD crossover for the holidays.