Revisit last important bear market lows

2/21/09

The following post are written by a self-taught technical analyst who just like me.

The retest of the November lows has finally came. The S&P 500 is still slightly above that support, but the Dow has penetrated it. Even every rally since November has been greeted with hope of a new advance that would end the bear market, the market gradually rolled over into a declining trend after the January top.
The November bottom was also a 9-Month Cycle bottom. In a bull market we would expect the market to rally for several months. The fact that the rally failed so quickly, is a very very bearish sign.
The long term shows that the 2002 bear market lows are also being tested again, so the market is at a very critical point. Many people who are still holding equities (at a 50% loss) are counting on being bailed out by a big rally. If prices fall significantly below long-term support, we are likely to see another heavy selling.
The long-term condition of the market is deeply oversold, as demonstrated by the Percent of Stocks Above Their 200-EMA. This indicator has never been at these low levels for such an extended period of time. Normally, a rally is in the cards as soon as these levels are reached, but the market is flat on its back, and it is hard to say when it will recover. It is important not to get too anxious to get back in. We are in a bear market, and negative outcomes are much more likely than positive ones.
Also, remember that oversold conditions in a bear market are extremely dangerous. If the current support zone fails, a market crash could quickly follow.
Bottom Line: The market is in the midst of a retest of very important support. Since we are in a bear market, I expect that the support will fail.

My comment: I strongly agree with this talent technician. We have been proved correct in most market forecast, especially there are no other good tactic beside trading with technical.