The definition of a bear market is one where prices continually make lower highs and lower lows. Since the fall of 2007 we have seen exactly that from the S&P 500 index (represented above through the S&P depository receipts - SPY). The lows from winter 2008 were recently violated confirming this bearish trend and further suggesting this bear has more damage to do. For the near term one ought to be cautious and patient. Traders should take comfort in the fact that we are getting closer to the ultimate target of this down move ($118 area). Based on the bearish flag pole formation (discussed last week) and the wide downward pointing channel (seen above) significant support should be seen just below $120 on the SPY or 1200 on the index itself.
While there is no medium to long term buy signal anywhere in sight (and probably won't be for quite some time) I remain confident the market will find a tradable bottom in the coming weeks in preparation for the coming US election in the fall. Again - hurry up and do nothing for now
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com
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