How Far Is This Decline Likely To Go?

The drop in the Dow Jones Industrial Average, plunging below the 50-day moving average (MA) on a mission to visit the 200-day MA, makes a good headline.

If we look at SPY, the ETF based on the S&P 500, we see the high volume that accompanied yesterday's nearly 2% drop. The price has little support until it gets to the May lows which coincide with the 200-day MA. The S&P is already down 3.0% from the July highs. Dropping to the 200-day MA would be another 3.6% decline.

The historical track record over the next several weeks does not show any tendency for institutions to buy, or sell, the markets this time of year. This is the S&P 500's seasonal chart:

In short, this pullback is overdue, and the odds are good that it will go a few percent more. But unless major negative news comes out, the seasonal patterns of the S&P 500 and most major stocks suggest that this decline will be short-lived and result in merely a short-term cycle low.

Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day.  To find out more, please click on the following link: www.markettamer.com/seasonal

By Gregg Harris, MarketTamer Chief Technical Strategist

Copyright (C) 2014 Stock & Options Training LLC

Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.

Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.

Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.

As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.

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