Using just a little common sense and some price/volume action can tell you a lot of what is going on in the major indexes at this time. While I’m somewhat clinging to the hope that the US markets are going to rally further after Friday’s collapse I’m beginning to think we about ready to start another market downturn.

Days where the Dow has been negative outpace up days almost 2-1 and there hasn’t been an up day where volume has exceeded the 50 day moving average since early December. For this market to move higher market internals really need to improve soon. We seem to have just bounced off of strong resistance and I can’t think of a single chart pattern in technical analysis suggesting that we are going to recover from these levels. It seems like the lows are acting like a magnet and drawing us down.

Take a look at this chart from the early 30’s to remind yourself that bear markets are a series of lower highs and even lower lows, and we may be witnessing one such high coming to an end. I have a feeling I’ll be referencing this chart a lot over the course of 2009 as we don’t have much else in the way to use as comparison to these volatile times.

7773 – 9653 = 24% rally

9653 – 7449 = 23% decline

7449 – 9088 = 22% rally

9088 – ????


The TSX has been somewhat of a bright spot lately in that the volume has been increasing albeit by small amounts as this rally has moved higher. I’m sure it has something to do with it being such a resource heavy index as this sector has bounced lately.