- Sharpest Decline In 5 Years

Market Summary
In our last report, we mentioned that worse-than-expected corporate earnings from several of the big players started to dampen the recent bully rally. As you can see from the charts below, more mixed earnings results combined with reports of the spreading credit problem in the mortgage and corporate lending markets contributed to very sharp declines across all major indexes. The Dow Jones Industrial average experienced its worst week in five years and several of the other indexes have fallen below their long-term moving averages for the first time in several months.

Despite the extremely sharp pullback, the upward diverging moving averages are still suggesting that the longer-term momentum may still be on the side of the bulls. One of the charts of specific interest this week is of the Russell because it is nearing the support of a two-year trendline. Notice how the RSI is currently below 30, which may be used by several traders to suggest the index is becoming oversold.