S&P 500 Still Looks Putrid

Feb.11.08 | About: SPDR S&P (SPY)



This chart continues to be in really bad shape. What is interesting is if you draw a line between the 4 highs of late 2007

  1. Early October
  2. Late October
  3. Early December
  4. Late December

And continued that line into February 2008 you would of expected more of a pop on this rebound... i.e. a pop to S&P 1450 or so, before being turned back. We didn't even get to S&P 1400. So we're stuck in no man's land of a primary bear market in my book. We could bounce 100 S&P points (to S&P 1435) and still be in a bear market.It still appears to be we are going to be retesting those January lows of S&P 1275 or so. What happens there will determine our mid term fate. A bounce, and we might create some nice conditions for a rebound. A break of that level and we continue down...1230 area which was summer 2006 lows looks like the next level.So while we get caught up here in the day to day, trying to figure out why absolute junk sectors are rebounding etc... it's really all white noise day to day. I say that because I see the exact same thing in many charts. They go up 4%, they go down 3%, they go up 2%, they go down 5%... up, down, down, down, up, up, down, down. And making no real progress. We have a few exceptions but 90% of the charts I am looking at are "white noise" charts - useless, directionless, cannot hold onto a move for more than 3 days a time, and then immediately reverses. 

As Doug Kass on Realmoney.com says "this is a market with no memory of the previous day". So for people like me who like to trend trade - that is hold onto positions and ride trends/relative strength for months/quarters, it is quite a terrible market. For "buy and hold" types, its quite a terrible market - those folks have lost quarters worth (year+?) of gains lately. It only is working for daytraders at this point. So I think many people are frustrated out there.

The absolute lack of conviction is leading to these hourly changes in direction which are making many people sea sick. However, it is not even (that) easy for shorts because the things that were the easy shorts of 2007 are now the stocks holding up the best. Irony at it's best. The market likes to confound the most people it can. Certainly this type of situation can make the case that it is easier to just go to 100% cash and wait it out until things become more certain.