Two Months into the Year, the Market Traded a New 12 Year Low

The Waterloo campaign continues, the market is on retreat. The bear coalition is defeating the once mighty Wall Street.

The market registered a major technical break down. On monthly, SPX500 broke decisively the year 2002 low. The market dropped all the way back to 1997. You don't think buy-and-hold (or buy-and-hope) strategy should be thrown to the garbage?


The technical picture is NOT pretty. Where is the ultimate low of this bear market?

The market continues its vicious cycle of deleveraging. The big boys are selling, and they are selling hard.

The market can't even muster a decent bear market rally. In the last bear market from 2000-2003, on three occasions, the market went on with a multi-month ~20% bounce. Each happened when the full stochastics on Monthly registered a major oversold signal. Since the mid of 2008, the monthly full stochastics went below 20 and has been under 20 since. Guessing when the market turns is a loser's game. CANSLIM investors don't catch falling knifes.

Looking at the performance chart of the sector Spiders, the nine funds representing 10 industry sectors within S&P 500, Financials continues to be the biggest loser with -39% return year to date. Technology shows the best relative strength with -8% loss.



In bear market, no sector is immune. Bears will eventually attack all the remaining sectors. Up to last week, Medicals and Health Care had been showing the best relative strength. Many leading stocks showing good fundamentals and technical merits were in Medical and Health Care sectors. Health Care and Medicals were creaminated last week (Thank you, Mr. President)


Take a look one of the leading stocks in Biotech, Gilead Science (GILD). Since the low made in the Nov of 2008, some institution money has been piling back to GILD. GILD recovered within 8% of its all time high on early February 2009. It rolled over last week, breaking below 200MA on big volume. 200MA is flatting and rolling over. A lower high is in the making. This is a classic long term topping pattern.



Looking at the 10 year weekly chart of GILD, GILD has been on steady up move for many years. If this is the final top, it could easily drop back to 20s.


Disclosure, I am holding a short position on GILD. I am going to hold and looking to add more short positions as it goes down.

Cash is still the KING; Shorts are QUEEN; Hard Metals are PRINCE and PRINCESS.