Thursday, March 5, 2009

Another Bull Trap Snaps Shut

Over the last couple of days a rally of about 100 points occurred on the SP500 US stock index. This little rally naturally had people wondering if this was going to be a large rally or perhaps the end of the bear market. The rationale being...if the market is down 50 percent surely it can't go much lower. I'm sure that there people thinking/hoping the same thing when the 1929 stock market decline was at a 50 percent loss point. It eventually went to -89 %.

This morning that little 2 day bull trap closed and the SP500 made a new low.

It is also worth noting that another example of a bull trap closing occurred today on the Canadian side of the boarder. Canadian National Railways Company (CNR on TSX exchange) has finished a sideways move that began back on November 21. At that time the low was $38.9. The price has dropped to $38.5 so far today.

These "technical events" are measurable scientific evidence that the bear market is alive and well and that the best bet these days is for lower lows.

These breakouts to new lows do not tell us where and when the bear bottom will occur but they do warn us that the bottom will occur somewhere in the future at some lower level.

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