The Faint Growl of a Bear Grows Slightly Louder

Charts: During the sharp, short March correction the S&P 500 hit its 100-day moving average, found support and rebounded. In early June the index hit its 100-day moving average (1313) and the correction got much worse. This means 1313 is the breakdown point for the current correction and this level provides an important resistance level. If 1313 cannot be defeated, it will be bad. Also, even though the March correction was deeper and harder, the fact that the 100-day moving average provided support means this correction is technically worse.

1300 is the 50-day moving average and the lower end of the gently downward sloping trading channel that the index had been in for about a month until it started breaking down. 1300 also needs to be defeated in good volume before an assault can convincingly be made on 1313.

1295-1294 was the April low. The index hit this level today and met resistance, turning down in the final hour of trading as if it had been scalded. This is not good because hedge funds trade in the final hour and they are considered smart money.

1257-1259 is the March low, if this level is breached it will be not good.

During this correction volume patterns have been bearish. Stocks hitting new highs vs. new lows have been okay. Emerging markets have been okay, not great. When virtually every technical indicator turns bearish it can often mean that a correction has run its course. Or it can mean another huge bear market is forming. This is why fundamentals and geopolitics are more important than charts. In any case, not every technical indicator is negative yet. But they all seem to be slowly turning sour as the correction progresses.

This correction up till now has been a "frog-in-slowly-heating-water" type correction. A frog will sit in water that is slowly getting warmer until the water boils and he is dead. The downturn has still been mild, the water isn't that hot yet, the frogs are hanging in there bravely. Value investors are saying they will start buying when and if the correction produces a 10% loss. Growth investors are saying they won't buy until some of the key technical levels mentioned above are overcome. So right now we have nobody buying.