Nobody wants to catch a falling knife, but today has all the earmarks of a reversal of fortune. Our target downside on the S&P is around the 1250-1260 mark. We hit 1260.80 this morning. The 1250-1260 level could provide the springboard for a reversal.
Options expire today, so expect some increased volatility.
Magically, oil prices and precious metals began to fall just as the Bush Administration began to figure out that their low approval ratings were tied to inflation, and the high price of energy. With one wave of the magic wand, prices began to fall.
The negative sentiment in the market is beginning to thicken. Any market rally into the summer will probably be a technical rally back to the old high's, and maybe a bit higher. This will be the final icing on the cake, and I would expect the market to begin putting the final touches on the bear market which could extend into 2007.
So, if you are a trader, more than likely you will get one more chance to play a rally. After that, you need to begin thinking in reverse, and put your shorting caps on. We will soon see why all of those insiders have been dumping their shares.
As we speak, Gold is down another $24 bucks, Crude is hovering around $68, and Unleaded Gasoline is down .02 cents at $1.92.
While Gold still remains overbought, energy stocks are reaching oversold levels. Here are the RSI's (Relative Strength) levels for some of the major oils. Remember, RSI ranges from 0 to 100, and an RSI approaching 30 signals a possible oversold area, and an RSI above 70 indicates an overbought condition.
*** As a footnote, when you see (V) or (A) next to a stock in the IA portfolio, V is a stock for "Value" investors, and A is for "Aggressive" investors.
