...To be sure, nothing really prevents the rising trends in all the indexes from resuming. But after several years of rising prices, the way in which the market rested this year is different from previous pauses. And that raises the probability that lower prices are coming.
For now, the trading range rules. Using big, round numbers, 1400 is the key floor for the S&P 500 and 12,800 for the Dow Jones Industrial Average. The Nasdaq's support floor is a bit harder to pin down, but clearly the low of November in the 2540 area is very important.
Again, this pertains to investors, not traders. It would take new highs on the indexes to change caution into optimism. While waiting for these levels may mean foregoing short-term profit potential, it also reduces the risk that the market is still going nowhere, if not lower.
The DJIA closed Friday at 12,800.18.
In a comment at the WSJ's MarketBeat blog, I said I was watching the Aug. 16 intraday low of 12,455.92.
Technical analysis is not a science. I knew a guy who all through the 80's bull was looking for the DJIA to fill a gap in the chart from 1974 at 579.94, if memory serves.
Speaking of big round numbers, on July 16, 1990 the DJIA closed at 2999.75. I pointed this out to an old-timer who said "watch the market tomorrow". I promptly forgot his advice, the market promptly dropped 18% in five weeks and I started paying attention.
Not that round numbers are magic, the Nikkei had its highest close at 38,915 the last trading day of 1989. The subsequent low came April 28, 2003 at 7603.
A thirteen year bear market that stripped out 80%!
Not as deep as the DJIA '29-'32, 89%, but thirteen years?
That'll teach you about the time value of money.
Or the time value of time.
