market folly

The guys over at MarketClub have done some more technical analysis on the Nasdaq chart and are looking closely at a possible shift in the Nasdaq here by using Fibonacci retracements. They believe that index is in a secular bear market and you can watch the Nasdaq video update here. Using Fibonacci retracements from the high in October of 2007 to the low in March of 2009, the retracement levels start to tell us something. Currently, we've encountered the 50% retracement which could potentially be a problem. The Nasdaq has already reversed after bumping into this level once so it looks like some solid resistance there. They also point out a slight divergence where the MACD turned down (negative) early while the Nasdaq continued higher. These divergences are typically early warning signs and are another reason to get cautious here. It's still too early to say whether this is a big reversal and start of a new trend, but things aren't necessarily looking rosy right now. Check out their analysis in their video update on Nasdaq fibonacci retracements.