The long-awaited retest of the November lows has finally arrived. The S&P 500 is still slightly above that support, but the Dow has penetrated it. Even though every rally since November has been greeted with intense 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 bearish sign.



The longer-term view 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 selling stampede.


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.


The medium-term condition of the market is neutral. Note that the ITBM and ITVM charts below are mid-range and falling. This is not a level from which we would expect a powerful rally to be launched.


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.

Technical analysis is a windsock, not a crystal ball. Be prepared to adjust your tactics and strategy if conditions change.

Carl Swenlin
About the author: is a veteran technical analyst who has been actively engaged in market analysis since 1981. A pioneer in the creation of online technical resources, he was president and founder of, one of the premier market timing and technical analysis websites on the web. DecisionPoint specializes in stock market indicators and charting. Since DecisionPoint merged with in 2013, Carl has served a consulting technical analyst and blog contributor. Learn More
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