Some Positives in Monday's Selloff

Since the S&P 500 Index reached 1,200 on an intraday basis on July 15th, the index pretty much ran unimpeded to 1,291 on July 24th. This 7.6% advance in a little over a week certainly warranted some consolidation. A large part of the market's advance had been due to a strong rebound in financials.

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As the below index chart notes, maybe this is simply a little profit taking or lightening up of positions in financials due to their recent strong performance. The shorter term index chart below seems to indicate the market is still in a small upward trend channel.

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On a longer term basis, the index remains in a downtrend; however the index could be moving to the upper resistance around 1,275.

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Lastly, the market decline over the past four trading days has occurred on lower volume as evidenced by the second chart. Maybe this bear market is losing its legs.

Comments

[corrado:]

I totally agree with your analysis, we have more than probably reached a short term bottom when the VIX spiked a few days ago and now we are retracing upward, of course with some bumps and profit taking. High degree of intraday fluctuation are the signal of market shift from one major direction to another.
Congratulations for your brilliant analysis. We want more !

2008 Jul 29 06:21 AM

[CLH:]

Sounds reasonable. Of course only time will tell.

2008 Jul 29 08:49 AM

[MarvinMBA:]

I'm looking for more deterioration longer term. We created the housing/financial mess ourselves and we would have been able to work ourselves out of it by intellegent monetary and fiscal policy. Then along came the energy price explosion and this places any possible recovery in question. Inflation/depression seems to be our future which can be mitigated by a strong emergency energy policy that will once again make the cost of food and transportation marginal to our income. I suppose we will continue to print money get out of our energy crisis like we always do but I'm waiting for Congress/Administratio... to act but it might be a long wait...meanwhile stockpile cans of beans...you might need it.

2008 Jul 29 11:28 AM

[user 2lakes:]

Lower volume? Of course, all the deep pockets are on vacation.

2008 Jul 29 12:40 PM

[Vox Rationalis:]

Mumbo-jumbo.

2008 Jul 29 12:45 PM

[user 4ver:]

Looks like we had a bounce today or continuation of an uptrend?

2008 Jul 29 06:25 PM