Barron’s Asks: Bear Market Rally?

Barrons_indices_2In Barron’s The Trader column,
Kopin Tan asks: "Is the Stock Market’s recent resurgence just an ephemeral, bear-market rally?"

Before answering that, have a look at the chart at right. It accompanied his questions; the black lines are my own.

There are several things to be gleaned from this:

First, the Nasdaq remains the healthiest of the major indices. Thats could be due to strong sectors within it (i.e., Enterprise Software). Or it could be due to specific stock leadership, namely  — Google (GOOG), Apple (AAPL), Research in Motion (RIMM), or (BIDU).

Second, the down trend seems to be not yet quite vanquished. What was described by some as a breakout is now looking like it could turn out to be a false breakout. 

Third, the SPX and Dow are at critical levels — a failure at the trend line likely means more downside to come. And, the recent May highs appear to be a lower low to this old traders eyes.  Any failure at this level means more trouble ahead.

Last, a further failure at the March lows would be disastrous for the indices.

Your mileage may vary . . .

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