Let's have a look at what happened at the markets last week then.

I have been taking a look at what happened to the USA markets last week after the latest moves down in price. Many people have been saying that it came as a shock but to be honest, the markets have been rising on weak volume lately and if you use MACD histogram you will have noticed that the bulls have been getting weaker and weaker as the prices inched up over the last few months.

The major indexes have been rising steadily since March 2009 when they reached their lows after a strong push down by the bears in the recent bear market. The funny thing is that the media hasn't really been publishing a lot about the strength of the bulls as the market has been rising for the last year. They have not mentioned the fact that many people have made fantastic returns in this latest move up, but now that the markets are going through a well needed correction it seems as the media have come out of the woodwork once again to spread the gloom and doom.

There are many good things about a corection in the markets. One is that it gives a great new opportunity to buy at a cheaper price again, but more importantly if you know what you are doing you can actually make money four times faster as the prices move down by shorting the market. Shorting the market seems a bit strange to most traders but it really is quite easy and as you have seen, the markets do fall fast when they start.

This latest move down came as many people were getting a bit over confident with their trading. They thought that the markets were going to carry up and up and just kept on buying without taking notice of the signs that were evident to most professional traders.

So lets have a look at what has been happening on the markets using this chart of the SPY which is an EFT based on the Standard & Poors 500 index.

You can see that the 50 day simple moving average (white line) has been serving as great support as the prices moved up since August 2009 with the price rebounding off the 50SMA a few times. We had a good correction in February 2010 where we witnessed the price break down through the 50SMA and come close to touching the 200SMA (pink line) At this point we notice that the Moneystream indicator in the bottom frame shows great weakness as it moved down through it's own moving average.

Now what we have seen in this latest correction is that the price has not only broken down through the 50SMA but way past the 200SMA as well and we have witnessed two days price close below the 200SMA which is a very negative sign and may well be a sign that the markets could carry on moving down even though we have just had a strong move up on Friday 21st. The Moneystream indicator tells us that there is money flowing out of the markets which is another weak sign.

What we are looking for now is for the price to hold at this key support level and hopefully give back the power to the bulls again. Will this happen? That's a great question that no one at this stage can answer but what we can do is look at the charts and rely on the information that they tell us. At this present moment we know we are at a key support level and that a break through of this support could mean a big move to the down side.

That's all I have to say about the markets today so until next time.

Happy trading.

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