Well am I glad I am currently in cash, I followed my own advice and moved to cash on Friday the 23rd of October.  It was particularly hard to sit through thursdays rally but Fridays huge drop made it worth while. That is why I wrote the blog entry on Patience, to remind myself to be patient,  you would not try to catch a falling knife so why try to get back into the market when it is in a downtrend.   However we may be seeing a nice opportunity presenting itself over the short to medium term for us to buy back all those nice stocks we have been eyeing up.  We are certainly in a short term correction which could challenge the October lows and go even further.

A brief look at the simple moving averages for the S&P500 and the NASDAQ-100 show us that the 10 Day Moving Average has crossed the 20 day MA.  Not the end or the world, but certainly an early warning sign.

S&P 500

A tip when using multiple moving averages is the use them like reverse Traffic Light signals.  The shortest MA in this case 10 Day is green.  The medium MA is amber, and the 50 day MA is red.  This makes it easy to remember what each color is.  The ideal scenario is green above amber above red.  However in both the S&P and the NASDAQ, the green has dropped below the Amber Line.

NASDAQ 100

Also interesting to note is the NASDAQ has broken already down to the October low and could move further.

Also important to note is that price in both the S&P and the NASDAQ 100 have significantly broken the 50 day moving average Red Line, which they last did in July.  The break of the 50 day MA in july resulted in another 4% decline in both the Nasdaq & S&P indexes before they picked up enough strength to recover.

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