Aug 28 2007
Dead cat bounce fails
On Saturday I blogged that the rally was doubtful since volume was low and I expressed concern that investors were stupid enough to push the S&P 500 to 1490 and possibly even 1520. Fortunately that did not happen and the break above the upper trendline has now failed.
The low volume on Friday when the S&P 500 poked above the upper trendline was the biggest clue that this rally would fail. Today’s volume was still lame, but at least it was higher than the volume on Friday.
Now is not the time to go long. The S&P 500′s downtrend is still intact, the 50MA is still declining, and if the downtrend still holds, then the S&P 500 is really staring into an abyss. I don’t think the February 2007 low will hold, and if the S&P 500 breaks that level then it is in danger of testing the July 2006 low of 1219.29.