BEAR MARKET BOUNCE APPEARS TO HAVE ENDED -- MONEY FLOWS INTO BONDS

RALLY ATTEMPT APPEARS TO BE FAILING ... Last week we wrote about the likelihood of the bear market rally running into new selling near the November lows just above 1400 in the S&P 500. That number translates into 12750 in the Dow (Chart 2). The downturn over the past two days strongly suggests that the rally attempt has failed. The daily indicators appear to confirm that view. The 14-day RSI line (above Chart 1) has met resistance at 50, which is normal in a bear market bounce. The daily stochastic lines (which are more sensitive than the RSI) have come very close to overbought territory at 80. Once again, financial stocks are leading the decline. Bond prices are rising as yields tumble. Money coming out of stocks continues to flow into bonds. We'll take a more comprehensive look at things later in the day.

Chart 1

Chart 2