Short term, the market is in steep descent. Reminds one of
the adage: "Don't try to catch a falling knife".
If you are charting the downtrend, the DJIA seems easiest to work
with.
The "average stock" is down 9.8% from its July peak, in line with
an ordinary, mundane 10% correction.
The market is getting strongly oversold on a short term basis, both
on price momentum and on breadth. The 21-day TRIN is also showing a
moderate oversold.
The market is just slightly oversold on an intermediate term basis.
Even mild price weakness, net / net, over the next week or two would
create the technical underpinnings for a rally.
My selling pressure gauge has been on the rise since early in the second
quarter, reflecting deteriorating market breadth. The uptrend in selling
pressure is intact, but is now signaling the market is getting oversold.
The major price indices have broken trend based on the 6/06 interim low.
My Basic Trend Index (NYSE A/D line adjusted by daily TRIN) is on the
verge of a breakdown but has not given up the ghost quite yet.
The SP500 closed Fri. 08/07 at 1433. A further decline to 1395 would
amount to a 10% correction. A decline below that 1395 level would create
concerns as it would trigger a break in trend from the 2002 - 2003 lows.
Link to the SP500 weekly chart.
Emotion is running very high with plenty of chatter about a credit
crunch or enough weakness from a weak housing sector to create a
recession. I'll pick this up later in the week. Note though, that
the FOMC is meeting this week. No doubt there are folks of influence
out there trying to push FOMC to ease up, either via a cut in the
FFR% or more benign language in the statement that attends the
decision.
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