Weekly Technical Commentary by Art Huprich - Friday Morning 02/13
Here are the Bull-Bear advisory sentiment readings and the comments that came out on 2/11/09. These figures are derived from investment newsletter writers and are produced by Investors Intelligence:
“...the bulls fell back to their lowest level in eight weeks. We also see pessimism increase to an eight week high. That maintains the overall bullish outlook from the contrarian sentiment indicator.” “The BULLS moved down to 32.3% from 35.2%. At the 11/21/08 lows the BULLS were 23.1% while the 10/10/08 low showed as few as 22.2%. The latest readings are still about 10% above those levels, but if the initial negative reception to the Geithner plan continues, the markets could retest those lows and see a corresponding further shift in the sentiment levels. The BEARS rose to 38.7% from 36.3%. That is the most pessimism seen since the 11/21/08 low, when the reading was 49.5%. The BEARS hit 54.4% at the mid-October low. The October levels were extremes for at least the last 15 years.”
Regardless of the Bull-Bear statistics, yesterday’s tape action was a true test of nerves for both the “Bull” and “Bear.” Following a 216 point plunge by the DJIA right after the open, the “senior index” rallied to only being down approximately 80 points shortly after noon. From there a second plunge took the DJIA to 7694 [the November 2008 closing low (support) was 7552], down 246 points. At the same time the SPX traded down to 808, in-line with its January support low of 804. At this point the market received a huge short-covering bid, thanks to news that the White House is working on a plan to modify home loans – this , the housing front, is in my opinion, what needs to be fixed! By the final bell, the DJIA was only down 7 points and the NASDAQ gained 11 points. On the NYSE volume expanded to 1.48 billion shares. There were 203 net declining issues and 118 new 52-week lows.
Conclusion
At the close yesterday, my email inbox contained questions, such as the following: “Another successful retest?” “Was this reversal a victory?” “...impressed today, what now?”
Here is my response: One thing I have learned since October 2007, when the “external” portion (the market indices – the broad market had already topped in June 2007) of the stock market topped, was not to get too excited about big one day reversals. Since the fall of 2007, the only two one day reversals that have added any value were October 10 and November 21, in my opinion. All the others, and there were many, proved false. Thus, other than the fact that sellers appear exhausted for now, yesterday’s reversal doesn’t get me all fired up, in and of itself.
However, if I put yesterday’s “reversal” within the context of the past four months, I liked it. I think it is another piece-of-the-puzzle in the long basing pattern that I foresee.
Market Data 
Markets 
AI
