Coolhand's Market Analysis

Oversold becomes more oversold as the losses continue to mount. Today's action continues the market's reaction to Ben Bernanke's comments from late yesterday afternoon, but the World Bank contributed to the negative tone by dropping its 2011 economic forecast from 3.8% to 3.2%.

The latest Beige Book report did show that economic activity continued to expand in some areas, but there were some Districts that saw a deceleration of economic activity.

Then, Moody's issued a Warning that the United Kingdom's AAA credit rating could be dropped at some point, which added further fuel to bear case.

The Dollar Index tacked on 0.5% by the end of the trading day, while oil tracked higher to close at $100.74 per barrel. Treasuries continued to be favored amid the negative tone towards stocks, as the yield on the benchmark 10-year Note dropped to a new 2011 low near 2.95%.

Let's take a look at the charts:



NAMO and NYMO reversed course from yesterday's positive action and remain on sells. NYMO continues to hit lower lows in the process.



NAHL and NYHL are hitting levels not seen since last August's decline. Both remain on sells.



TRIN remained in a buy condition today, while TRINQ shows an oversold condition that suggests a bounce may be coming soon.



BPCOMPQ looks to be falling off a cliff, which does not bode well for stocks. It would take some serious buying pressure at this point to put this signal back into a buy condition as it's moving quickly away from that lower bollinger band.

So the charts remain very bearish, but so is sentiment, which is often a precursor to a rally. But so far fear is winning in spite of our sentiment survey's buy status.

I jumped the gun a little too early by buying this market when I did, but I knew that prices could go lower. My thought was a low would probably come around OPEX. So far that seems to be playing out. But I had anticipated some Fed talk would stop the bleeding. We got the Fed talk alright, but it only added to the selling pressure. That's okay by me if it helps get sentiment beared up to the point of a rally.

The problem is that we can see 3 or 4% of upside go by before we can execute an IFT. Sometimes more than that depending on how tight the spring is loaded. And buy signals can lag even more. Picking a bottom is tough enough, but picking it in a limited trading environment is trickier. I am looking at this from a longer term perspective though, which is why I chose to enter when I did. I am willing to endure some draw-down if it means I am fully invested when a reversal comes. If we eventually hit new highs for the year, which I'm convinced we will, the current pain will then become a distant memory. But for now pain and fear rule.