It's Friday, and everyone's a technical analyst

by Michael Tarsala, CMT

Everyone is suddenly a technical analyst on volatile days with lots of negative headlines.

Don't listen to the intraday chatter, unless the person doing the talking is looking at daily and weekly closing prices.

There's no denying Friday's storm of bad markets news. A disappointing jobs report. Bad economic data from both Europe and China. A slide in the U.S. manufacturing data.

None of that came as a massive shock, though. There has been no big technical damage done in the long-term timeframe yet.

Volatility is rising again today, you bet. But investors need to keep some perspective. This is the chart that investors will want to watch:

 Source: Stockcharts.com

 We've been talking about the level marked by the black bars above for nearly a month now.

There's no hocus-pocus about it. It's simply a concentrated clump of past buying and selling. Those areas tend to act as magnets, pulling prices toward that area.

And that's exactly what happened. So a test of the "magnet" area is not a surprise.

A daily close -- and for investors, a WEEKLY close, below that key support area would be meaningful, and yes, more negative. There's not much volume support if prices slip below it, which could bring more volatility and more selling.

Will we see a breakdown?

I have a gut feeling it'll hold for now.

But if you're a long-term investor, just ignore my gut.

Watch the daily and weekly closing prices. And have a plan in place that takes into account a real turn for the worse.

If you have questions or if you want to make sure you have the right plan in place, talk to us. We can help.

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