No Reason to Panic - Yet

April 5th, 2013

by Dominic Cimino

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.


With the market selling off into this weekend, and with all the talk about potential spillover from Cyprus, and with more talk about an imminent market correction, and after learning this morning that the jobs picture remains problematic, the temptation for a gloomy market outlook is natural. However, the charts below indicate that markets remain above support levels, and perhaps suggest there's no reason to panic yet.

The S&P 500 Index continues to trend within three bullish trend channels of varying degree. The major channel is shown as the red parallel lines, while the minor one appears in yellow. The small blue channel, the least significant of the three, represents the minor-minor channel. Notice that the initial support trend line rendered by the minor-minor channel remains intact, even as the market has sold off this week.

The next chart is the Dow Jones Transportations Average Index chart. This index has been a leader during this most recent rally. Notice how the index remains solidly in its bullish trend channel, which is depicted in blue. Also note how the index moved above its all-time high, which is represented by the horizontal white line. That old all-time high now serves as initial support for the index. Finally, notice the text book inverted head and shoulders pattern that is present on the chart. The shoulders and head are highlighted by the red horizontal lines, while the neckline represented by the old all-time high is shown in white. Large bullish ramifications remain intact as long as this pattern remains in place. A large penetration down through the neckline with momentum would negate this pattern.

In conclusion, maybe this week's break is the beginning of a significant market correction. It's certainly possible. On the other hand, these charts confirm that both the S&P 500 Index and the Dow Transports Index still remain above initial support levels. Clearly, these support levels should be monitored, and any future failure of their support would suggest the potential for an even larger correction. But until those levels are breached with momentum, perhaps there's no reason to panic yet.

Dominic Cimino

Chief Investment Strategist

Financial Advisor

Preferred Planning Concepts, LLC

2800 South River Road #240

Des Plaines, IL 60018

Registered Representative, Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Preferred planning concepts, LLC & Cambridge are not affiliated.


© 2013, Dominic Cimino of Preferred Planning Concepts, LLC (You can explore the services offered by Preferred Planning Concepts by viewing us on our website at www.ppcplanning.com) Any redistribution, reprinting, or reference to this chart or content is allowed so long as reference to the author and source is acknowledged.

Important Disclosures

Please be aware that this is not a recommendation to purchase or sell any security. This is not a recommendation for any individual or institution to alter their portfolio holdings. Every individual or institution has its own risk tolerance and investment objectives and perspectives.

Any above opinions of the author should be viewed as such. These opinions in no way represent any type of guarantee. Realize that if you choose to invest in securities, investing in securities carries with it uncertainty and the risk of loss of principal. Lost investment opportunity is also a possibility. Investing in securities carries no guarantees.

Past performance is no guarantee of future results. The price movements within capital markets cannot be guaranteed and always remain uncertain. The above opinions are meant to stimulate thought and should be viewed as such. You are encouraged to discuss these views with your representatives if you have any questions or concerns.

Any indices mentioned are unmanaged and cannot be invested in directly.

It must here be mentioned that technical analysis offers no guarantees of future price movements. Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain.

Neither Cambridge Investment Research nor Preferred Planning Concepts is responsible for the accuracy of content provided by third parties. All material presented herein is believed to be reliable but we cannot attest to its accuracy.

All charts presented were made available by eSignal, a charting service available to individuals or professionals. Anyone interested in exploring the potentials of eSignal should give us a call.

Website by the Boston Web Company