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monday update
Dec 01, 2008

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SHORT TERM: bearishness returns from a holiday, DOW -680

Overnight the Asian markets were mixed. Europe, however, opened lower and closed -5.50%. US index futures were under selling pressure overnight and the selling continued into the opening as the SPX gapped down friday's 896 close to 878. As the selling continued, at 10:00 ISM reported manufacturing declined further in November to 36.2% from 38.9%, and October Construction spending slipped to -1.2% from -0.3%. With little buying support the selling continued into the afternoon when NBER, the research watchdog of the US economy, reported that the US recession started in December 2007. By 1:00 the SPX was pushing to break through the 848 support pivot, then FED chairman Bernanke's speech was released: http://www.federalreserve.gov/newsevents/speech/bernanke20081201a.htm. An interesting read. Around 3:00 the SPX broke through 840, hitting SPX 816 nearing the close. During the entire day there was not one bounce of 10 points or more in the cash market. The SPX headed literally straight down all day. At the close the SPX/DOW were -8.40%, and the NDX/NAZ were -8.45%. Bonds gained two points, Crude dropped $5.00, Gold fell $46.50, and the Euro was lower. Support for the SPX drops back to 789 and then 768, with resistance at 912 and then 935. Short term momentum swung from an extreme overbought on friday, to fairly oversold on monday. It's still quite a volatile market. Tomorrow there is nothing on the agenda for the economy or the FED.
After the first 5-day rally in 18 months and a gain of 21% or 155 SPX points, 50% of that gain was given back in just one day. Certainly the market was extremely overbought, but today's selloff was a bit more than expected. A pullback to SPX 800 would represent a 61.8% retracement of the entire rally. Should this level fail to hold support it would certainly appear that this bear market rally has failed as well.  
MEDIUM TERM: downtrend low at SPX 741
LONG TERM: bear market rally under pressure

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