TECHNICAL COMMENTARY FOR FEBRUARY 11

If there was any doubt that the bear market began with the top at 1,576 in October, this past week should be a sharp reminder that it “ain’t over until it is over”. The S&P 500 was hammered back some 64 points, or 4.6 per cent, and the Dow Jones Industrials fell 560 points. But no new lows were seen, so in theory at least our corrective rebound that began two weeks ago is still in play.

Still, the resistance we thought would materialize at around 1,400 proved to be formidable. Will we now start a rapid collapse back to the lows at 1,270, or does this rebound stay alive? This week is option expiration week and our betting is that the rebound will resume.

This week saw evidence that the economy continues to slow (the ISM Services number fell below 50 – a sign that the economy is moving into recession). Fear of defaults remains high, particularly from the monocline bond insurers. The banks and the brokerages led the decline this past week yet we saw respected analysts coming out with buy recommendations, saying that many of these banks were now very undervalued. Well, they can get a [ read more... ]