Anticipating the Downside in a Pause That Refreshes ~ The Risk Averse Alert

Wednesday, September 03, 2008

Anticipating the Downside in a Pause That Refreshes

Now, what about the current period's similarity to the market's bounce from its March 17, 2008 low? Despite some fright causing volume to spike this week, the S&P 100s underlying technical condition remains rather tame.


Although at critical thresholds, RSI and MACD continue holding up much as they have over the past month. The same occurred late-March through early-April '08 while the S&P 100 essentially went nowhere.

One difference worth noting is RSI has yet to deteriorate in a fashion similar to what I have underlined. This same deterioration probably will develop over the rest of the week, as yesterday's negative reversal appears set to drive the market lower.


It will be interesting to see if the CBOE Put/Call Ratio continues displaying a positive bias, should the market move lower as expected. Yesterday's and today's relatively subdued options activity suggest the behind-the-scenes sentiment is not too concerned about any sell-off imminently carrying the market into oblivion.

If July '08 lows are to be challenged, the Put/Call Ratio appears to be indicating a sharp reversal higher might follow ... much as occurred during the latter half of April '08.

Bottom line, a strong move lower beginning the nearly 1-year-old bear market's next leg down does not appear in the works following yesterday's intra-day smack. Rather, expect any further decline simply to be the downside in a pause that refreshes ... much as occurred mid-stream in the market's bounce earlier this year...

Fast Money
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