We did get our bounce, but it did not last. Bears score a victory as the SOX loses key support at the close. It is now in the November gap which it should close tomorrow (441/442), The only consolation is that it is done with a bullish divergence on the daily chart, but lately that has not been very effective for long.
SPX closed below the 200 dma and lost March 2003 trendline support. It must now hold 1253.29 (61.8% 2000/2002) at the close or we are in danger of retesting May lows at 1245.34. We are still trying to form a bottom, but bulls need to step up to the plate quickly and with conviction. Oil is down three dollars and looks headed for the 60's again. Gold has lost its luster as inflation fears evaporate with Fed tough talk. The time will come when it will be fashionable to hype stocks again and when that happens, look out above. This is not 2000 or 2002. We are not at outrageous P/E's, in fact we are right where we want to be. Neither are we in a recession or getting near one, although Bernanke needs to lighten up. The negative noise is deafening and even though it hurts, remember that a decline with pessimism is a strong recipe for a reversal. If everyone was bullish right now, I would be very worried. Nevertheless, conservative traders should wait for an all clear, while aggressive traders should either short or nibble at longs on drops only (do not take longs on upside breakouts) and with tight stops.
This entry was posted
on Wednesday, June 07, 2006 at 9:13 PM.
