The market volatility is certainly continuing throughout this week. With triple digit moves in both directions it’s difficult to determine where the overall stock market is headed. Unfortunately from a technical analysis perspective it doesn’t look good. Check out this 3 month chart of the TSX.

The short term trading range is between 11400 and 12200 and we’re currently trading around the 11,700. The most recent leg of the trading is downward. The moving averages are the really interesting part of this chart. Falling below the 200-day moving average is not a good thing and is almost always leading to a bear market.

The chart shows that we’re right on the verge of crossing below that line. When/if that happens man technical analysts will start shorting the market or clearing out of positions. That will push the markets even further down. Not good.

The only thing that could help us is if that 50 day moving average stays above the 200 day and we get some consistency in the market or strength. If we do see the crossover occur, then watch out below! Taking a look at the 3 year TSX chart you can really see what happens when there’s a crossover of the 50 and 200 day moving averages.

Naturally, the drop off will not likely be that dramatic but it is a concerning crossover nevertheless. So the next week of investing will really be a make or break in the support levels of the overall stock market. What is your take on this market?

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