Stock Market -- Technical

As most technicians will tell you, the stock market is now
substantially oversold. As a guess, we are due for a rally of
several weeks duration to begin either this week or in the early
going next week. My selling pressure gauge -- a moving average
of NYSE decliners -- is near strong oversold levels. This one has
worked best in the decline since autumn '07.

It is still too early to tell whether this is a routine cyclical bear
market or whether something more serious is afoot. If one were
to allow for a rally over a few weeks in the short run, there
could well be another sell off that carries the SP 500 (1099 10/3
close) down to around the 1000 level by the latter part of
November. That would represent a nasty enough cyclical bear,
but if we put in a 1000 low seven weeks out, the chart would
give even odds it was a good bottom that would hold. For now,
I think it is reasonable to re-visit the issue then before delving
into darker scenarios.

Looking right ahead, the technicals suggest to me development
of a decent, tradable rally over the next 3 - 7 trading days. If a
rally does come along, I would note that traders have been
getting very edgy once the SP 500 gets about 2% above its
25 day m/a. That would put a provisional top in around the
1225 - 1250 level.