Tuesday, January 20, 2009

Technical Picture - Bears Own It

The stock market started the new week and new presidency (inauguration day) on a firmly negative note, easily wiping out the minor upside bias noted at the end of last week. Financials were hammered in early trade and after a brief reprieve during midday, appreciably extended the swoon, keeping the stock indices on the defensive all day. While Financials (down 15%) including brokers and insurance paced the way lower breaking supports, the declines were broad based with little in the plus side other than Gold GLD +2%.

Last week's bounce was paltry given the 62% retracement of the Nov. lows to the Jan. highs. This kind of lackluster bounce suggests that unless we see a sustained rebound like a shakeout, the door is wide open to further near term deterioration. Support at 800. Having said all that, the market is oversold and we did see TRIN close above 2.0 which suggests excessive selling pressure and potential for a bounce over the short term. But, it will take a move all the way back to last week's bounce highs just to neutralize the negative bias.

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