It's a rare time indeed when the major daily index charts stay oversold. When RSI's hit 30 and stochastic's hit 7 across the board and we go lower you know you're in a bear market. This is what we dealt with today. Extremely oversold on the daily charts, not the 60-minute charts but the daily charts. That indeed unusual except when you're in a truly bearish scenario. After today's action I think it's pretty clear to all that things are in bad shape from both a fundamental and a technical perspective. The futures were flat going in to the big jobs report. Everyone was anticipating something good to come out of left field to help the bullish case come alive once again. They didn't get it. The numbers were not good. The private sector was anticipating job creation to the tune of 100k. Instead it got 83k. The unemployment level fell to 9.5%.

Sounds good but it actuality it was bad news because it was discovered this came from a large number of folks who stopped looking for jobs altogether. They simply gave up and left the work force. No interviews. No jobs. Nothing! The futures initially shot up only to have them come back basically to flat. We opened a drop higher but that didn't last long at all. The market started a slow but steady move to the red side of the ledger sheet. In the end it was just another day in the down trend with the entire day spent at oversold with risk 30 or less. Unusual over the past many weeks, even as we headed down off the top. This time, as we are below 1040 S&P 500, the oversold conditions didn't kick in. Another strong and commanding day for the bears.

Now remember, the longer we stay oversold the tighter the rubber band gets and eventually you get a reflex bounce back higher than lasts for a few days. That bounce may only ultimately take us back to 1040 or a drop higher and that's when you can come in and short again. It's not easy taking on new short positions when you have deeply oversold daily and short term 60-minute charts. We can clearly stay oversold but I'd rather take on new plays when things are no longer oversold, or at least not on all time frames. The important thing is not to get bullish just because you get a roughly 5% or so bounce back up that seemingly comes out of nowhere.

Even the bears know they have to rest and reset themselves before taking things lower. There will be a decent bounce soon but it's truly impossible to time. Again, that can be used to go short or get out of longs you may be stuck in. And again, it's important to understand why we rally and to not get overly bullish.

Chart after chart that we're showing you shows the carnage. Not only from the index charts but also from the perspective of deflation. The Baltic index chart making new lows. There is just no pricing power out there and this only comes from a point in time when deflation is taking over. Where the economy has stopped cold in terms of growth. In fact, it's falling apart. No jobs. No housing purchases. No goods being shipped. Deflation! The world index showed today tells it all. breaking down without looking back. Always bounces to come but for now you get the point. Major technical breaks. Railroad chart. Airlines chart. transports chart. Cyclical chart. breakdown after breakdown and not looking good for short to medium term. To me, what seems to matter most is how chart after chart, no matter where you look, is showing deflationary action. It is what it is and we need to act accordingly.

When markets break lower or even when individual charts break lower we always have to look at the internals to see if the break downs occurred with confirming internals. Did volume increase on the breakdowns? Were there massively more decliners than advancers on those big down days? On the up days, did volume contract and was the advance decline line not all that good? The answers are clear. Volume did increase quite a bit on the day we lost Sp 1040. Volume has been light on up days. Decliners overwhelmed advancers on the break. There isn't any way for the bulls to play spin doctor here. The internals speak loudly and we all need to be listening. If the market had broken on light volume with mixed advance decline lines I wouldn't be buying this breakdown as real. However, everything points to it being very real. Again, it is what it is.

So here we are. We are very oversold across the board. A bounce of some decent magnitude is out there soon but hard to say from where. We all need to accept the market for what it is at the moment. There are no bull markets around the corner. we can all hope something will come out of nowhere to change what's taking place. Is it out there? well, I guess anything is always possible but for now, nothing is out there and the market is telling us to adjust to what seems to be yet another bear in a long line of bear markets since March 10, 2000. Have an awesome three day weekend and enjoy life safely.

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.

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