Testing the Lows

Both the Dow and the S&P are within spitting distance of their October closing lows. The top chart show the Dow and the bottom the S&P.

There is no telling what will happen now. The market is very over sold but that doesn't mean much with this much bearishness. The market could bounce todaywhich would be nice. It could just dive right through and go for the 2002 lows (see my October 16th post and October 10th post.) Or we could get a head fake: there are a lot of traders with stops just below this level. There is nothing market makers (or other large traders) like to do more than sell the market down to take out the stops and then reverse higher, so I would not be surprised to see a big down draft in the morning with a higher close by the end of the day. I would not bet on this, but it will be interesting to watch.