Is this the beginning of a Bear Market or just a correction?

June 8, 2006 · Print This Article

Once again, the market vacillated widely today on continued concerns over interest rates. The market opened lower and moved slightly higher shortly after the opening bell to close the gap and then proceeded to plummet. However, the sharp decline was short-lived as bargain hunters stepped in around mid-day to stop the bleeding and moved the market higher. The S&P was able to hold an important support level (one that I think could be tested again over the coming weeks) establised in ‘04. The market continues (in my opinion) to carve out what could be the summer trading range.

The S&P did close below its 200 day moving-average and the Russell (IWM) an Dow (DIA) managed to close slightly above this psychologically important level. Watch these three major indices closely and how they respond to their respective 200 moving-averages. So far things look good. Furthermore, bullish indicators continue to become more plentiful at least for the short-term. The question is , where is thing headed over the intermediate-term?

Our Gap Fade strategy had another successful trade today. Both of our strategies continue to outperform the market by a wide margin, although our ETF strategy has yet to have a signal for quite some time. Hopefully, that will change soon. If the major indices had held at the lows of the day a trade was certainly imminent. As I mentioned yesterday if the market continues its bearish ways and brings the four indices into oversold territory then we could have a nice set up. Sometimes in market like we are currently experiencing, sitting on the sidelines is the preferred method of trading.

RSI Wilder (5) for June 8, 2006