Stock Market -- Technical & Psychology

Technical
There are easier days for technical comments, but here goes. The
recent weakness in the market has brought it to a fairly deep short
term oversold, with the SP 500 about 10% below its 25 day m/a.

The "500" did close under the previous bear market low of 752
set in 11/08, but, with today's close of 743, the action was not
decisive enough to claim that a new dramatic breakaway downleg
is in force. Thus, the focus can be on whether the clear oversold is
deep enough to warrant a rebound. My 25 day price oscillator
broke down below an improving trend in force since last autumn.
That tells me not to simply proclaim a rally is imminent. My six
week adv / decline "flame" is deeply oversold and that tells me there
is a good bounce in store over the next 10 trading days.

My intermediate term indicators run out to 13 weeks. I rely heavily
on these to trade, and, they are in whipsaw mode and have been of
little help. So, I am stuck with the short run.

My weekly SP 500 chart has long term support at 800, so weekly
closes below that level would turn that chart bearish on a longer
run basis. I do note that my NYSE a/d line is a country mile above
levels seen when the SP 500 broke 800 back in 2002. Such has
been the interest in smaller cap stocks as well as the disastrous
performance of the major financials.

With so many years of looking at charts, I have developed trend
momentum trendlines that have proven helpful to me. The SP 500
did move out from under the crash line in 11/08, but has not yet
been able to clear a serious momentum downline in force since 9/08.
Recent failures to do so ratify the bear market. Chart here.

Market Psychology
The major issue in recent weeks concerns how well psychology
will hold up with corporate profits so very weak and with the
leading indicators not signaling recovery straight ahead. It is
difficult for many to summon the courage to buy stocks now even
if profits recovery is 6-7 months away because profits are so very
low.

I do not use psychology as a primary indicator because it is not at all
easy to "read" and because it can turn on a dime. I am now looking
to see whether despair may be starting to creep into the environment.
Tough read now because we are so oversold.