Another one, from someone who I consider to be about the best market technician in the world:
'I really do not tend to lean bullishly. My bias, more often than not, tends to be bearish. I
can cite you a gazillion reasons why I should be bearish now, beginning with the Utilities
that are breaking down.
But instead I want to list a bunch of short term indicators I follow that continue to call for
a rally at midweek this week. Here is my list:
1)The Bank Index again outperformed the S&P 500.
2) The S&P 500 has now made a lower low on a closing basis and the cumulative
advance/decline line has made a higher low.
3) The number of stocks making new lows was less today than Friday and many fewer
less than the November and October lows.
4) The McClellan Summation Index is negative -- however a net differential of plus-
6,200 advancers minus decliners would turn it up. Typically, a reading over plus-5,000
means the market is short-term oversold.
5) My Oscillator will be maximum oversold Wednesday.
6) Up volume as a percentage of total volume (30-day moving average) is 41%. Upper
30s to low 40s is where the market usually rallies from.
7) The put/call ratio, while not extreme, at least remains high.
NBC Nightly News is beginning a new series tonight with Brian Williams, Meltdown:
Making sense of it all. I call that front-page news.
9) They finally sold their winners today: Agriculture and tech, for example.
10) The Market Volatility Index (VIX) is almost jumpy. One more day or two would do it.
11) Despite the ugly market today, folks did not rush into gold, they did not rush into
UltraShort Financials ProShares (SKF), they did not rush into UltraShort Real Estate
ProShares (SRS), and, most importantly, they did not rush into U.S. Treasuries.
I think the market’s ready for an oversold rally, but I have been writing about these
indicators for several days now and each day the list gets a smidge longer. My preference
would be a nice whoosh down tomorrow morning that gives you the opportunity to buy.
The market does not always accommodate your preferences though.
One final thought: I have gone all the way back to the highs of the market in 2007 and I
can only find one other time that the S&P 500 was down this many days in a row (it’s at six
now) and that was that awful decline leading to that mid-October low where there were
eight straight days. You can see it’s rare to go down so many days in a row. I grant you
that mid-October low wasn’t a great low, but a great oversold rally did result from it.'
I suspect that we'll open weak today, break the low's in the first half hour which will trigger a load of stops which are placed around 735-740 on the S&P, then reverse sharply fueled by short covering. If we break 740 decisively, then we're looking at low to mid 600's before we see substantial support.