Market Headed to Retest Lows?

Consider

• The S&P 500 is down 10% over the past five trading days.
• The VIX had risen 40% to the high on the index Wednesday.
• The BKX closed at 12 year lows (though not on an intra-day low, which is coming).
• Down volume to up volume was 29:1.
• Bank of America (BAC) and Apple (AAPL) are getting whacked in the after-market.

The market appears headed for a re-test of the lows. If the re-test is successful, we probably are at the bottom. If it is not, hit the replay button on the last four months of 2008.

Comments

[jmmx:]

You are probably right.

Jan 15 06:15 AM

[Donald Johnson:]

Point and figure charts for $indu have a bearish price objective of 7200 for the DJI, which is 12.2% below Wednesday's close.

Jan 15 08:18 AM

[irishman032000:]

I believe that 7200 may be couple hundred too high. The will be a 15-25% drop in housing prices, a 30% drop in oil, unemployment will reach double digits. The worst is still ahead the only bright spot will be the dollar. There will be an investment vacuum like we have not seen in our life yet to come.

Jan 15 08:50 AM

[edmin:]

On Jan 15 06:15 AM jmmx wrote:

> You are probably right.no I think this down will be over in a day or 2.

Jan 15 09:01 AM

[Carl Spackler:]

Where are all the perma-bulls calling for a bottom now! I love these periods when market participants actually put their rally caps away and think about the fact that stocks could actually fall. As someone who has played the short side for over a year, and who put in his shorts two weeks ago, I have started covering my shorts yesterday. I took half my position out at close yesterday and I will watch the other half closely. I feel that the market will retest lows, but on a short term basis, the market is getting oversold. I have my own self-made indicator and it is flashing that there will be a counter trend rally in the next few days. I think this coming little rally will take a few days, and may encompass roughly 25 to 50 S&P points and then we can reload up on the short side. If the market continues downward, I will gladly profit from my remaining 50% position, but do not be like the perma-bulls - take profits on the way down and be ready to cover and reload your cash.

Jan 15 09:46 AM

[ali k:]

This is quite some speculation without any sound ground at all. A few bad days doesn't do anything to the fundamental value of the S&P 500 or Dow Jones. It's quite a jump to say that we're retesting the lows. You could be right, but you could also win at Roulette the next time you're in Vegas (which I hear is quite crowded nowadays as desperation is getting higher).

We need to have some statistical or quantitative reasoning to believe the market is retesting new lows. Just a few bad days isn't enough. All that is is a "gut feeling," which isn't how billionaires make their money.

Jan 15 10:34 AM

[OldLimey:]

InvestmentPlayground: 'Gut feeling' sounds slushy and might appear to have no place in the investment or trading process. However, if instead we call it 'intuition resulting from the subconscious processing of multiple hard and soft inputs from the market and the wider environment, based on years or decades of experience' then I think it can be argued that 'gut feeling' does have a role. (Even relying on it entirely, inadvisable though that would be, is not the same as pure 'red or black' gambling.) It's very much a matter of personal style. Trading the FX markets, I make decisions based largely on technical analysis but I do also listen to what my 'gut' tells me while I'm watching the action. Not everybody's style for sure, but don't knock it. It's worked for me for over 30 years.
(PS Nice handle, by the way - just about sums up these markets.)

Jan 15 11:13 AM

[bobbobwhite:]

Take some Good Earth Original tea for all those gut feelings. You'll feel better as it reduces any "upsetting" desire to buy now.

However, I am still slowly easing into my intensively researched list of ultra-low PEG stocks at such low prices that there is almost no downside left(other than BK) in the remnant world that may still exist after this latest spot of bother is over.

Jan 15 11:40 AM

[willydo:]

I just bring up a 2 or 3 year chart of anything I'm interested in. It is plain to see the trend from there. Look at S&P.. you can see that last 2-3 weeks was way too steep..

Jan 15 12:02 PM

[DaveW:]

I believe this retest will hold and rally from SP 750. However, I also believe we will get to SP 600, eventually....likely around Q1 earnings and/or negative geopolitical events later this spring.

Jan 15 12:27 PM

[henarl:]

The reference to Las Vegas was well taken. After all "investing", especially in the short term, is really just gambling altho it should be more educated gambling than simply playing the red and black. And "gut feeling" does play a part.

Jan 15 02:03 PM

[Socialism c...:]

7000 is also too high. I'm looking at Dow 5000 before Q2. Why? Citi is failing, BAC is also foundering and looking at more government assistance. Either of these going down is more than enough to absolutely crush sentiment and a wave of selling will result that will dwarf Oct.-Nov. of 2008. For good reason -- both banks are critical lynchpins to the bubble economy. And the bubble is going to burst, despite government's best efforts to prevent it and retain power.


On Jan 15 08:50 AM irishman032000 wrote:

> I believe that 7200 may be couple hundred too high. The will be a
> 15-25% drop in housing prices, a 30% drop in oil, unemployment will
> reach double digits. The worst is still ahead the only bright spot
> will be the dollar. There will be an investment vacuum like we have
> not seen in our life yet to come.

Jan 15 05:25 PM