*** TA Update ***
The McC Osi for the Nas fell to -65, NYSE to -55, and the Spx fell to 848, just below yesterday's low, with market internals decidedly negative, especially u/d volume. All these signs portend another leg down below 839 now, and the bounce that was expected today was very weak and on very light volume.
This bear market is not similar to the declines in '87 or '97 or even '73 to '74 in that there are worse structural problems in the financial systems and economies in the U.S, Europe, and in other countries such as Iceland. The main problem now is not the housing market even though that is still going to get worse, but it is the credit/liquidity markets. Money is basically locked up and frozen, with just the beginnings of it loosening up a tiny bit.
Technicians look for two likely scenarios for tradeable bottoms within bear markets, because even bear markets have technnical rallies: true capitulation or double bottom reversal patterns, because they provide the best chance to enter long positions without undue risk.
I remain very suspicious of the so-called double bottom we've had from Oct.10 to recent days, and it appears likely we will break down sharply below 839 in the next day or two.
Fundamentalists keep getting burned every time they buy stocks because they don't realize that the market is not driven by fundamentals but by supply and demand for stocks.
Obviously the enormous redemptions and forced selling has caused supplies to overwhelm demand and continues to do so.
At some point, it will be balanced in favor of demand but that time doesn't appear to have occurred yet. Buying has been on very light volume in the past few days on every bounce, and while selling has also been light, in a severe downtrend, the onus of volume is on the buy side.
In downtrends, selling pressure and volume can dissipate for a while and then increase again. It is risky to go long or short as the market volatility works both ways.
The markets sharp decline in the last 10 minutes today, Monday, demonstrates the lack of support and the strength of selling and short-selling.
This secular bear market is likely to last another year or two but in the interim there will be sharp bear market rallies from time to time.
Daily stochastics for the Spx and individual stocks have more room to go on the downside to reach levels below 20% or to get close to 0%.
So another leg down to Spx 783 or 768 appear very possible in the days and weeks ahead, but first we have to see 839 be broken intra-day, and on a close.
Crude oil fell to new lows at 62 after the close, and is likely to reach 60 very soon if the stock market falls further, and probably to the 50's, where support is at 50. If it reaches 50, then it is not a guarantee that it will hold support there, as one has to wait and re-evaluate at that time if it occurs.
Commodities such as copper and corn have been very hard hit and seem to have even lower prices ahead. Copper is below $2 and corn is around 3 3/4.
The USD remains very strong and with the Eurozone likely to cut rates more than the U.S., the US dollar could rise even more, to the 90-95 area.
Great companies and stocks will eventually recover some but even they can be dragged down if we get another leg down.
regards,
drbob |
