LOW VOLUME BOUNCE NOT THAT IMPRESSIVE -- SHORT-TERM INDICATORS ARE STILL NEGATIVE -- SPY RUNS INTO SELLING AT FRIDAY'S LOW

DOW AND NASDAQ ETFS ARE STILL BELOW 50-DAY LINES... The modest price bounce of the last two days has done little to reverse the downside momentum created by last week's high-volume price drop. For one thing, this week's bounce has been on relatively light volume as the following charts show. The first two charts also show that short-term indicators are still negative. The price of the Dow Diamonds (Chart 1) and the Nasdaq 100 Shares (Chart 2) are still below their 50-day moving averages. Chart 1 shows that the daily MACD lines for the DIA are still negative, while chart 2 shows the 12-day Rate of Change (ROC) for the QQQQ in negative territory below the zero line. The S&P 500 SPDRs are the only one of the three that's still above the 50-day line. I suspect that won't be the case for long.

Chart 1

Chart 2

S&P 500 SPDRs LOOKS WEAK ... The daily bars in Chart 3 show the S&P 500 SPDRs finding support at their 50-day average. I suspect it will be broken before long. Notice the light trading volume on the modest price bounce. In addition, short-term indicators are still negative. One of them is shown here. The red and green lines below the chart are directional movement lines based on the last fourteen trading days. The green line represents buying pressure and the red line selling pressure. The red line has crossed over the green line by the widest margin in more than three months. That's not a good sign. The hourly bars in Chart 4 give a microscopic look at the January action. The box area represents the price bounce of the last two days. It shows the SPY meeting resistance at Friday's intra-day low at 127.16. Today's intra-day high was 127.15. That's a logical chart point for the rally attempt to meet with more selling. I suspect the bottom of the box will be broken before the top. We should know by the end of the week.

Chart 3

Chart 4