During the fall and winter, it didn’t seem like stocks would ever go down again. It was a rare period in which the market went straight up without even a hint of a breather, but now the resolve of the bulls is being tested courtesy of some exogenous events. Is it time for the bears to shine or is it simply another buying opportunity on the way to the moon? Let’s see what the chart says.
Bears Have a Pulse
It has actually gotten a bit ugly for the bulls of late and the bounce back on Thursday didn’t do too much to shift the advantage away from the bears. If notice the volume during the recent downdraft, it is consistently higher on the down days than the up volume is on the bullish days. This is classic downtrend action and suggests that more selling pressure might lie ahead.
I can count at least five days of technical distribution which means that selling has occurred on volume higher than the previous day. Investor’s Business Daily has been vocal on the importance of distribution days and how too many can kill rallies. A few here and there is normal, but five in a short span has bearish footprints all over it.
Support Becomes Resistance
The 50-day moving average (blue line) has acted as strong support throughout the run up in prices, but has since been pierced dramatically and will act as resistance from now on. That equates to about 1300 on the S&P 500, so it is likely that any bounce will fail at that level.
Yesterday I wrote about healthy corrections and what exactly that means. A drop in prices never feels good when it is happening and can only be labeled “healthy” in hindsight in my opinion. The takeaway point from this chart is that it is time to exercise caution and cut your losses quickly for the traders out there. The character of the market, at least in the short run has definitely changed in favor of the bears.
Getting Technical: Is It Finally Advantage Bears? is an article from: 
