BEARISH FORCES RETAKE THE MARKET
There have been two consistent themes that myself and Arthur Hill have been stressing in recent Market Messages. One has been that the rally from mid-March is a bear market rally. The other has been that the rally has probably ended. That dual reality was brought into sharper focus on Friday when a combination of intermarket forces sealed the fate of bullish hopes. A huge jump in the unemployment number, a big drop in the U.S. Dollar, and a record surge in oil prices sunk the stock market in a big way. Charts 1 and 2 show the Dow Industrials and the S&P 500 hitting two-month lows on heavy volume. That's after failing at their 200-day moving averages in mid-May. Rather than repeating ourselves, I refer you to last Monday's Message headlined: "It still looks like the bear market rally is ending -- Short-Term ROC lines have turned negative -- Long-Term ROC shows market still in bear market -- VIX jumps 10% -- Nasdaq fails at 200-day average for second time". All of those bearish factors are still in play. Chart 3 shows the Nasdaq ending the week back below its 200-day line after a brief pop over that major resistance line on Thursday.
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