Monday’s sharp drop of the major averages gave the bullish crowd a lot to think about and confirmed our bearish stance. Follow trough selling was contained yesterday as the chart (thanks to MarketWatch) shows, with most of the activity being directionless bouncing around the flat line.
Despite sharp rallies and subsequent market drops we are now just about back to where the S&P; 500 started the month. The underlying cause for this confusion is of course the price of oil but also the realization that the problems in financial stocks will be with us for a while longer. Rating agency Fitch put insurance giant AIG on credit watch, because they are concerned that more large write-offs are looming.
As I have repeatedly said, until all skeletons are out of the closet, we will not see any normalcy in terms of fluctuations return to the market place.
As of yesterday, our Trend Tracking Indexes (TTIs) have moved to the following positions with regards to their long-term trend lines:
Domestic TTI: -1.06%
International TTI: -8.64%
We continue to watch things from the sidelines and will stay there until a clear breakout to bullish territory has materialized.