Welcome to 2008! That was an ugly finish to an ugly first week of the year. I know there’s that old say about “as goes January so goes the year” but isn’t there a similar say that says “as goes the first week of January so goes the month of January”? Or am I just imagining that? No matter, we have to operate in the here & now. Things are clearly bearish as evidenced by all trends now being ‘down’ on the trend table (below). The Nasdaq’s dive away from its 200-day moving average made the trend table unanimous today. Also note that the Naz and the S&P 500 broke the necklines of the head & shoulders patterns we’ve been watching for a few weeks.
Like the Nasdaq, the S&P is reading oversold on its short-term stochastic. Buying oversold and selling/shorting overbought has worked well in this sideways market. But if we start to trend the buls won’t be able to lean on stochastic to save them.
The small caps continue to lead the way down. Autumn 2006 levels were hit by the Russell 200 today.
I had to take a look at T2108. Unlike the last couple of times the market approached these levels T2108 is above that important 20 level. That tells me that the market, while short-term oversold, still has plenty of room to fall before becoming REALLY oversold. If I was one for predictions I’d call for a lot of pain in the near future.
Welcome to bear country…
| Trend | Nasdaq | S&P 500 | Russell 2000 |
| Primary | Down | Down | Down |
| Intermediate | Down | Down | Down |
| Short-term | Down | Down | Down |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
*** I’m simply using the indices’ relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.
Looking at T2108, I think “bear country” is an appropriate term. We haven’t been at the current levels (20s) since the beginning of the bounce from the last bear market (2003). T2108 is almost looking like a lock to hit those lows from 2002 sometime later this year…and at this rate, sooner than later.