One For The Bears

The market managed a bounce this morning that wasn't bad, if you ignore the fact that it only lasted about 5 minutes. Right from the open there was some pretty ferocious selling pressure, but the market did manage to stave off going negative. Volume was about average, so the damage was proably minimal, but psycholically, it has to be bad for the bulls. However, none of the technical indicators were showing a terribly oversold condition, so it was probably premature to try to bounce the market here. We are probably due for a retest of 1100, and we will see how it acts there before drawing any conclusions.

With a sideays going price relative line, the Nasdaq is no help here. It is, however, so close to the previous low that this can almost be called a retest. The fact that it came off the lows is some consolation, but not enough to make a bet on. I'm going to sit this one out for a while.

One reason for my doubt is the Dow industrials, which are just about to hit a new high on price relative. If it does, I suspect that will signal a break of support in the market and another leg down.

The Russell 2000 has already hit a new low in price relative, but that isn't a big surprise. It also won;t be a big surprise if the rest of the market follows suit and starts breaking down again. Whether it does it this month or next, it will, in all probabilty, happen, as I think the market has come to the conclusion that Bernanke has nothing else up his sleeve to juice the markets. The effects of QE2 are now gone (less than 3 months after it ended), so I don't expect a lot of enthusiam for QE3, if it does happen.

Today could have been a pretty good bounce, but there was no follow through on it. Despite a positive day, chalk this one up for the bears.

I will have the new highs update shortly.