Focus on Intermediate Indicators

Next week could certainly be interesting after the Fed's decision to stay flat failed to inspire the market and only produced a feeble attempt to rally on Wednesday. The market then sold off hard all day Thursday on very heavy volume. That certainly has taken some of my short-term sentiment indicators to extremes, and the spike low is likely to lead to a short-term bounce next week.

The selloff pushed the Dow below its March lows that I stated in recent columns was likely to happen. Now it will be important to see if that move produces enough panic to put in an intermediate-term low. If the new low doesn't hold and the index continues to trade below that level, then the January and March lows are liable to turn into significant resistance levels, and that could indicate another move lower is in the cards.

The key to where we're headed is likely to appear when the market shows its hand next week, as it will certainly attempt to bounce from these levels. The strength of that bounce along with the participation of leading stocks will certainly carry a lot of information.

Let's take a look at some of the longer-term trends in the market that are changing. First, though, I want take another look at current action in the PowerShares QQQ Trust (QQQQ - commentary - Cramer's Take) (the Q's) and the small-cap index.

PowerShares QQQ Trust (QQQQ)

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Source: TC2000

While the Dow broke below its March lows, the Q's have held well above that level. It is still fairly close to the May and June highs, but it remains below the important 50- and 200-day moving averages.

The break below the $48 support level has now become significant intermediate-term resistance. You can also see that the institutional money stream at the bottom of the chart continues to remain in a long-term downtrend, and that leads to the high possibility that the index is also likely to test the March lows.

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S&P Small-Cap 600

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Source: TC2000

The Small-Cap 600 Index has also been outperforming the large-cap stocks, but that may be changing. It recently broke below the 50-day moving average and has clearly broken its intermediate-term uptrend.

That breakdown leads me to believe that small-caps are in for more downside testing before this trend is reversed.

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S&P 500

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Source: TC2000

I'm still keeping a close eye on the long-term trend of the S&P 500. You can see from the chart at right that the major primary uptrend in the 1990s ended in 2000, and it didn't bottom until 2003. Since then, the index went back into a new primary uptrend that tested the 2000 highs last year.

That long-term trend was broken this year, and it now appears that the new primary trend is down. That of course can change, and it doesn't mean that we have to go through several years of trending down. However, the index needs to clearly break above the May highs to change that outlook.

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Agricultural Chemicals Sector

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Source: TC2000

The agricultural chemicals sector of the market has certainly been on a tear, especially over the last year and a half.

You can see that this area the market continues to remain very strong, but it looks very stretched over the intermediate term, and the sector is starting to show signs that we may see a correction back to at least a long-term trend line.

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Mark Manning, AAMS, is an Accredited Asset Management Specialist and Registered Investment Advisor with Butler, Wick & Co., where he specializes in wealth management. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Manning appreciates your feedback; click here to send him an email.