Obviously the negativity was pretty thick today. All of the major indices ended on their lows for the day and made new 2005 lows as well. The Dow smashed through its 200-day moving average on increasing volume. Surprisingly to me the S&P 500 still hasn’t touched its 200 DMA this year. Back in January I said that I wouldn’t be surprised to see that MA get tagged. That statement still holds true and at this rate it could easily get hit tomorrow — it’s just about 10 points away.
It feels like we must be close to some kind of bottom just from all the negative news & commentary I’m hearing. This morning I was IM’ing with Duru (who just wrote another missive about the Fed minutes rally on Tuesday) and I said to him “surely things can’t get much more negative”. He replied that he was thinking the same thing. That told me that if we were both thinking that then everybody was probably thinking the same and there was more downside to come. Perhaps once we don’t even ask that question it’ll be time to buy ‘em. (Some of Stephen’s hedge fund buddies were on thinking like me & Duru this morning except that they were out buying.)
Even without looking at the market internals indicators, which were quite bad today, I knew things were bad. I noticed yesterday that the drug sector was about the only green index. It got joined by some oil-related indices today but outside of those sectors there was nothing but bad news. I also noted that around 11 AM over half of the Nasdaq’s % gainers were really thinly traded stocks. I’m talking about stocks that had traded well less than 10,000 shares by that time of day. Meanwhile the % and point losers list were dominated by stocks with volume in the millions. No surprise what the up/down volume indicator looks like today!
BTW, T2108 closed at 20.26, just a hair above that (almost) magical 20 level.
Surely things can’t get much more negative, can they? 
Carnage surely abounds. Too bad GE didn’t disappoint. That combined with IBM could have been enough to give us that one big flushing sound. Let’s see whether this game of chicken the market is playing with the Fed causes the Fed to back up off the accelerator…
So Mike, at what point do you consider the market to be in a downtrend and start trading again with mostly shorts?
I’ve considered it to be in a downtrend for a while now — using the 50-day moving average as a guide for swing trading. But I don’t swing trade during earnings season. Like I said when I posted that first T2108 chart a couple of weeks ago, I would have been looking to short rallies then, if I was still swing trading. I should also say that I’ve never like chasing shorts down, so I would be jumping in right now if I wasn’t already short. I’d rather get them on bounces.