firm's morning comment

Over the last few weeks in our S&P 500 Equity Market Review notes we have pounded home the idea that if stocks broke the 2002 lows we would experience another leg down. We suggested that the numerous rallies from that level since 1997 had proven a rewarding investment/trading strategy thus it became significant. We suggested that breaking that level was akin to breaking a dam and it would bust the psychological comfort zone that this level created for buyers. Since breaking those levels the broad market as measured by the S&P 500 has been off close to another 8.00% and nearly 23.00 % year to date.

You would think this drop, on top of last year’s drop, would have caused mass panic by now, yet sentiment for the most part remains more disbelief than fear. Until this sentiment trend reverses the path of least resistance (as crazy as that may sound given the carnage stocks have been through) remains down. Our downside targets for the S&P 500 are 675 then 600. At the latter level we think the convergence of what will likely be armageddon like sentiment and big support could create a final and significant low.One observation that suggests we may be in the last stages of this bear market and setting up for a final capitulatory low is the fact that over the last several days even the strong issues (the few that existed) are now also taken apart.Stay tuned for more updates ...


posted by Peter Greene