Jack's Wrap - Retest Argument: The Ultimate Bottom?

Retest Argument: The Ultimate Bottom?

 

The argument is on. Now that we're retesting the old lows, what does it mean to the stock market of the United States and for that matter, the stock markets all over the world? There is a huge contingent out there that figures all bear markets end when you get the perfect retest of the old lows that took place some weeks or months ago. You get a rally first off the initial lows and then you come back down and retest and then it's off to the races. The markets around the world just explode higher as if all the ills have been cured. People feel as if they're "owed" a strong bull market because of all the nastiness they've had to endure. In this particular situation, I wouldn't count on it. Yes, we may see a very decent rally off the old lows. It may even look like all is well. Be careful. The problems are accelerating and there is absolutely NO GUARANTEE that this is the end. In fact, it's beginning to look as if that will not be the case at all and that over time it would not be that far fetched to see the Sp visit the old lows from 2002 at 775. (You know what) help this market if we ever lose Sp 775. The problems were facing by no mean guarantee a happy ending. Even when this bear market ends, it's very possible we will see a long period of sideways action before some day slowly heading higher again. This is not at all likely to be a new bull once the bear does end somewhere down the road. I have no idea where that end is at this time because the market from a technical perspective and the world, from a fundamental perspective, are not giving any real signs we are near or at the end. Please don't think it's all good just like that because we're retesting, even if we see a strong rally here. There aren't many signs of even that taking place but the bulls can hope for at least that. Just recognize that it's nothing more than hope at this point.

 

Another case the bulls are main that things are better than they seem is that we're not printing as many new lows on this move down than we did at the initial lows. That is true and can be construed as a positive for sure. The problem right here is that many stocks are just breaking down out of triangle's I have been talking about recently. Aapl and MMM for instance, two major leaders, broke down today out of those patterns for the first time. That is not bullish for the market for sure. Once these stocks break they can run down quite a ways before finding some good support. If the leaders such as MMM and Aapl were performing better on this retest it would make me more hopeful. Those are just two stocks performing badly here. The list just breaking down out of those nasty triangle's is too long to go in to here. It's a sign that things aren't healthy and we need to  be EXTREMELY careful with regards to getting too bullish too quickly. You know the drill by now. Leaders have to lead. Leaders need to be set up in bullish patterns. That is just not eh case now. if that changes we will naturally adjust to this but for now we are not in that bullish set up across the board thus the need to be extraordinarily appropriate in the near term here.

 

The internals tell the tale today. Volume was light and in many ways that's the worst possible news. When selling is intense in terms of price, you want to see some type of capitulatory volume event take place to tell us the very last sellers are gone. That could be the case here because the volume is so light but it's also possible the sellers are waiting for the break down below Sp 839 before coming in with more force. With volume so light, you have to be very alert to that possibility. We know for sure there are still no buyers and no catalyst right here thus as long as light volume selling continues, it opens the door to more folks piling in on the dark side if we do indeed break below 839, especially on a closing basis. The advance decline line today was approximately 10/1 negative on the Nyse and severely negative as well on the Nas, though not as bad. That's hardly a positive though. It was still terribly negative at 6/1. When you get an advance decline line that bad across the board, it's yet another reason to not take anything good from the light volume. Clearly the majority of stocks were being sold, not bought. Overall, the internals paint a very bearish picture.

 

We're at the precipice folks. The Sp is about to test the lows as is the Nas. 1493 is the old low for the Nas but the close at 1499 is a NEW CLOSING LOW for the Compq. Not good news. The Sp is at 552 and just above the old intra day lows at 839. The old closing lows at 848 is just 4 points away. The bulls need to act now and it would shock me no end if they don't put up a huge fight here. If they don't then the markets will easily break their old lows and just crater out. 775 or the 2002 bear market lows would be next. that would be incredibly painful thus again, expect a fight by the bulls although the price action says it will be a very difficult fight to win. This bear is the mother load as they say and many reliable technical's aren't working. We had strong positive divergences on the 60 minute charts coming in to today and you can see how well they worked. Only the daily's have been overall reliable. They aren't very good to say the least. Not death knell bad but not good. We're at the point of no return here. Some extremely interesting times. We have kept you out of the whole bear. Making a few dollars along the way. Trying to keep things calm. Feel good about what you haven't had to endure. We're going to be watching more closely here than ever before because of the ramifications of losing Sp 839. One day at a time is all I can say. Let's continue to avoid the mess. We will be guiding throughout as always.

 

Peace

Jack