Securities Research Services

Monday, July 14, 2008

Market Vulnerable For A Crash

The market continues to stare down the brink of the abyss here. Yes it's oversold. No it doesn't have to bounce.

Here's the problem. While the SPY took out weekly support at $125 on a closing basis last week near term sentiment levels have remained stuck at neutral. The VIX, at $27, is roughly 8 points away from the levels it spiked to before the last two market turning points. And, adding insult to injury, options traders continue to buy calls during every short lived rally.

This is a market that is clearly sliding down a slope of hope. While it could and probably should bounce here, we are thinking that just the opposite is going to happen. This market is what markets look like before they crash.

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