US Stock Market - More Weakness Ahead

Dow, S&P500 and Nasdaq index broke below their uptrend line on Friday. Volume has been picking up and this suggests real selling and not just profit taking.

The recent weakness started off from China when news broke that banks have been told to suspend lending. Although the suspension was not system wide, the market reacted nevertheless with Shanghai index moving down more then 3% and Dow closed nearly 1.1% lower. Adding to the uncertainty was US President Barack Obama proposal to overhaul US banks in order to avoid future financial crisis.

Technical charts are looking weak with MACD below its signal line and –DI above the +DI together with an increasing ADX value.

The support level for Dow is near the 10,000 level which is where the Fibonacci retracement is located. Expect to have more weakness next week.

US Market

Market continued to rally higher in May. The upward momentum seems to be slowing down as the market hit critical resistance level.

The S&P500 index is approaching its 200 day moving average. The market has been going sideways for the past few trading sessions with the index moving in a band of 880 and 930 levels.

The index has rebounded from its 20 day moving average and seems to be moving towards the upper Bollinger band.

Next week should see the market testing the 930 level.