Weekend Review 11/25/11

Looking at some of the headlines this week I couldn't help but be reminded of the refrigerators I use to see littered with magnetized words displaced across the surface with the occasional attempt at haiku or limerick. Grab a salad bowl and toss in the the phrases “Worse week since” or “Biggest drop since” or “Fastest rebound since” and mix in some dates of the most notable market years like '29', or '32', or '33', or '74', or '87', and the ensuing article nearly writes itself. It seems this is the worst Thanksgiving week since '32' and not simply because the mystery shoppers are using pepper spray to gain an edge on their competitors!

Considering this is the worst Thanksgiving week in 80 years, it does give pause how much worse this week could have been if a day and a half wasn't lopped off due to the holiday. The Russell gave up 7.4% this week, closing at a near demonic 666.16. 639.85 now becomes a key price point as this was the August 9th low which held as the floor for the majority of the ensuing price action and as such will be viewed as support. The next price point that will be of significance is 601.71 as this is the price that has been construed as the market bottom and if challenged will weigh heavy on the market psyche like an anchor.

Of note this week is that pessimism has increased as indicated by the AAII survey showing and increase in bearishness by 7.8%, and in conjunction with this the overall health of the market is still showing deterioration.

Russel Weekly Chart

Primary

Secondary

$BPNYA

$USHL5

With the Market Monitor Primary moving bearish this week and New High/New Low continuing downward the preponderance of evidence continues to indicate a market ill suited for my style and horizon.  With a number of indexes such as the Russel and NYSE approaching the bottom of their range and key price points coupled with a continued influx of news, my belief is that there is a lot of emotion playing out right now that has yet to become exhausted.  These ingredients are a mixture for volatility and in this state negative surprises can result in disproportionate moves.