The dramatically oversold conditions we saw on Thursday and Friday had technicians over the weekend debating whether we are entering a new bear market.
This morning (Monday), Lowry, the US' oldest technical analysis service, echoed this theme, telling clients that "the temptation may be strong to conclude that perhaps, just this once, things are, in fact, different and the market has fallen into a new bear trend without the historical forewarnings of a major top."
They note that the markets have not exhibited the usual signs of technical decay that precede a bear market:
1) no indications of selective buy interest (A/D lines were strong);
2) new highs remained strong;
3) demand for stock was expanding, supply was contracting.
So where are we? The key, they note, is the magnitude of the decline so far: roughly 10 percent, and that corrections of this magnitude are fairly typical: since 1960, there have been six corrections during bull markets of 10 percent or more, averaging just over 12 percent.
"Therefore, it might be premature to conclude the extent of the current market decline will devolve into a new bear market," they conclude.
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