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Daily Snapshot



Ok, this isn't funny anymore. The problem I have is trying to figure out if the environment is really depressed or if it just feels depressed because the financial markets were in a bubble. My best guess is for a combination of the two. In speaking to a number of institutional accounts yesterday, the common question was; where is support? The answer is that there are no support levels in a bear market, just as there are no resistance levels in a bull market. So what then can we turn to in a bear market for evidence of approaching an important low?

I am glad you ask. In the absence of any significant change to the fundamental backdrop (economy and earnings) that would make valuations cheap on an absolute basis, I look for the near and intermediate-term technical indicators to reach levels that created lows valid enough to kick- start a countertrend rally. Prior bear market lows didn't come because a price level was hit, they came because there were no sellers left and the shorts were trapped in an extremely bearish trading environment. The markets need to reach a point where it is so nasty that buyers, whether short-covering or straight long in nature, show their view with their positions instead of their tongues. Right now, so many are talking negative, but are not betting that way because they are scared of a vicious rally on news of war. If there was real fear in the market, no one would look for a bounce and the market would be down a whole heck of a lot more on impressive volume. That is simply not the case right now, but may soon be with a few more days like yesterday.

With mutual fund cash positions at such low levels, there has to be a reason to be a buyer when there is very little change in the fundamental and valuation backdrop. That reason can come in the form of true near and intermediate-term capitulation as seen in a variety of indicators that I continually try to update you with. Yesterday I outlined the intermediate-term (weekly) indicators, which show a market that is heading toward those needed washed out levels, but not "there" yet. Today, I would like to review the near-term pictures to see if the more than 2% drop yesterday had a meaningful impact on the daily indicators. Unfortunately it didn't. The indicators could only be called neutral at best - take a look for yourself.

The S&P 500 with stochastic, MACD and RSI indicators (in that order).

The NASDAQ Composite with stochastic, MACD and RSI indicators (in that order).

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