The SPX has rallied off a moderate oversold and the bounce has been strong enough to
be credible. The quick turn has taken the SPX back up in line with its positive 14 month
trend channel and has also brought it above the 100 day m/a, a measure that has mostly
contained any downside damage over the past year. The short term oversold condition has
been corrected (For more, scroll down and review the Feb. 3 post and chart).
There has been some technical damage and, from a shorter term trend following perspective,
the market is still trending down. Since the SPX did hold secondary support at 1750 and
bounce impressively, I am content for now to look at it as being in an approximate 1750 -1850
trading range. SPX Daily With Trading Range
Since there is simply no clear blueprint for how the US economy and the stock market will
behave during a lengthy period of deteriorating liquidity growth from a high level, I am
resisting the idea of being strongly opinionated about the market except to say I would not be
surprised to see some degree of erosion in the market's p/e ratio this year.
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