Latest Steve Saville stock market comments. Looking for a bounce very soon, then another big drop.
Current Market Situation
Here's the current situation:
a) The Dow Industrials, the S&P500, the Retail Index and the Dow Transportation Average have all broken below both their respective
December and November pullback lows.
b) The NASDAQ Composite, the NASDAQ100 and the Bank Index are still above both their November and December lows. The
Semiconductor Index has fallen below its December pullback low, but is still above its November low. In other words, the 'tech sector' is
holding above support for now.
c) The European markets have recently been very weak. The weakest has been the UK market, with London's FTSE100 Index having
fallen for the past 10 trading days in a row and having just made a new bear market low (see chart below). Note that it is extremely
rare for any market to fall (or rise) for 10 days in a row (5 is usually the maximum before a 'pause for breath' occurs).
With the London market so 'oversold' and poised right at major support a rebound during the coming week is a high probability,
although it is only likely to be a rebound within the context of an on-going decline. By the way, what happened to all the analysts who
argued, over the past 12 months, that the US$ wouldn't fall very far against the euro because the European stock markets and
economies would be weaker than the US stock market and economy?
d) Sentiment indicators tell us that there is still not much fear in the US stock market, so the market is probably not yet close to an
intermediate-term bottom. However, on a short-term basis the market is oversold and is likely to experience at least a 2-3 day bounce
very soon. Due to the desire to generate a positive signal from the January Barometer and likely efforts to 'prop up' the market before
and after Bush's State of the Union speech on Tuesday (not to mention Wednesday's FOMC Meeting), this week is a good candidate
for such a bounce.
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