When you're in a down trending market one of things that happens is people expect the markets to be down huge every day. That there can't be any good days along the way. Basically it's just down hard day after day. That is not the case at all. Even in the worst bear markets it's all a process. Most days are lower, of course, but not every day is a big down day. We closed well off the lows.

However, we got very oversold on the short term and even the daily charts. The short term charts were more oversold than I've see in quite some time with RSI readings in the mid teens. Daily RSI's near 30 so we closed off the lows. Also, shorts took some gains ahead of the big jobs report tomorrow morning. However, when all saw said and done the market was lower today. Just another day in the down trend. You can't over analyze things. Again, day to day is unclear but overall the trend remains clearly lower. A second day with a close below 1040 is all we can take from today. Bottom line is things remain bearish for now.

We got down as low as 1010 today on the S&P 500. The markets got very oversold. The 1000 area is good support and being as oversold as we were we finally got a bounce back up. The bulls can hold on to a little hope if they need to in that at least we didn't close all that far away from 1040. A close down at 1010 or thereabouts would make things look and actually be much more dire for them. Once you start getting 3% or more away from critical lost support you are playing with longer term fire. I haven't seen Apple Inc. (AAPL) 60-minute charts ever print 16 on its RSI but we saw that today and at the same time we saw the major indexes record readings on the mid teens. The rubber band snapped and we rallied but still fell short in the end of going green. Small losses but losses nonetheless. Another good day for the bears as severely oversold didn't lead to a green day for the bulls even though we weren't down all that much when we got to those extremes of oversold.

Today we saw some incredible economic reports. Jobless claims shot back up and that seemed to catch folks off guard as it sent the futures down initially when the number came out. However, the most shocking report was the horrendous 30% decline on the housing report. Just incredible to see how our economy is falling off a cliff the past two months. Once the housing credit break vanished on April 30th of this year, so did the bids in this arena. Housing is dead for now. That's inarguable. No recovery for sure at this moment in time and it seems to me there's no quick cure coming any time soon. The economy is really taking it on the chin and the market is telling us it doesn't look good down the road for now. Things always change over time but for now things aren't promising for at least the short term from a fundamental perspective.

So now we have the jobs report on tap and this report is the important report of the year and we will see some fireworks in the morning ahead of the open on the futures. The numbers aren't likely to be good but if it's not overly bad then maybe we get some relief from these near oversold conditions. 1040 is big resistance but after that we have gap at 1060 on the Standard & Poor's Depositary Receipts (SPY). This level would be extremely tough for the bulls if we were able to get through 1040. If the number is very bad it will be more than interesting to see how much near oversold conditions will affect this market or not. It will be fun and exciting if nothing else.
The market is in bad shape folks. Tomorrow will tell us a lot more about the condition of things. Nothing is easy here near oversold but oversold is starting to stay that way a bit longer these past few days. Signs of a bear market but let's see if the bears can take things further away from 1040 before getting overly bearish. If there's a big gap down tomorrow that doesn't get captured, the bulls are in some trouble medium term. Tomorrow will be very telling. Let's have fun watching it unfold.

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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