Yesterday I suggested that we take note that the weakish market
uptrend had rolled over. I did not anticipate such a fast and forceful
drop would result today. The SP 500 closed out around 1236, and
that's close enough to the low test zone of 1200 - 1215 running back
through late 2005 to invite bear inquiries and to test it out again.
I do not often try to play the commentator, but it appears the weak
action in the market since the sharp rally peak in May of this year
suggests investors are concerned the tax rebates have not been
effective enough in stimulating the economy and that the still large
credit quality yield spreads in the fixed income market are garnering
negative attention re: the financial system.
At any rate, if we do see a test of the lows in that 1200 - 1215 bracket
on the "500", there would be a deep enough short term oversold to
make the sitiuation rather interesting although risky.
We told all our traders over a month in advance this move was coming. Many were caught off guard so don't feel bad. We will likely see a washout and a retest of the lows before moving on and upward.
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