MAJOR MARKET INDEXES ARE STILL BELOW THEIR 80-WEEK (OR 400-DAY) MOVING AVERAGE -- THAT MAKES THIS A BEAR MARKET BOUNCE -- MICROSOFT WEIGHS ON OVERBOUGHT NASDAQ 100 INDEX
WHERE IS 80-WEEK AVERAGE ... One of our readers asked where the 80-week moving average was located on the major market indexes. Charts 1 through 4 show where its daily version (400-day average) is located. The Dow and the NYSE Composite Indexes are right up against that major resistance line. The Nasdaq and the S&P 500 are a bit further away. Of those four, the one I'd watch most closely in the S&P 500. That's because it has the best track record with the 400-day (80-week) average.

Chart 1

Chart 2

Chart 3

Chart 4
80-WEEK MOVING AVERAGE AND THE S&P 500 ... Chart 5 applies the 80-week moving average to the S&P 500 over the last ten years. Since 1994, only four signals have been given by the crossing of that line. A buy signal in 1994 (not shown here), a sell in 2000, a buy in 2003, and a sell at the start of 2008. At the moment, all of the major market indexes are still below that major support line. In other words, they're all still in major downtrends until proven otherwise.

Chart 5
I'M TOO BULLISH? ... Some of the feedback I get leaves me scratching my head. One reader wrote "I think you're in danger of sounding too bullish just as the major indexes are testing major resistance areas". My response to that reader is to please read (or reread) my Tuesday message headlined: "Until proven otherwise, this is still a bear market bounce". I don't know how I can make it any clearer.
MICROSOFT TUMBLES ... Microsoft tumbled more than 6% today on rising volume. The daily bars in Chart 6 show the big tech bellwether gapping back below its 200-day moving average. Since MSFT is the biggest stock in the Nasdaq 100, that drop naturally had a depressing effect. And it may be coming at a bad time. Chart 7 shows the Power Shares QQQ Trust testing its 200-day moving average and a resistance line drawn over its November/December lows. The Commodity Channel (CCI) Index also shows the QQQQ in overbought territory. There's one more reason why the QQQQ could start to run into more selling at current levels. Chart 8 shows that it's regained exactly 50% of its November/March decline. That's normally a formidable resistance barrier.

Chart 6

Chart 7

Chart 8