Market moved lower again on moderate volume as the living dead were trotted out in the form financial stock woes and the pessimism of the IMF regarding the future of US housing. No one has ever cared what the IMF thought, but in a world of doubt, people would believe a talking dog. Merrill did not help things late when they announced a large write down and the intention to raise cash by issuing stock.
Today's action continues the first re-test of downside support created in mid July. The test of the first rally always provides only spotty low volume support. While there is no guarantee of the integrity of current lows, this test process is virtually unavoidable when there is such extreme bearish sentiment. Accompanying this particular break is a professional trading profile of sell side strategies somewhat unique since the advent of electronic trading. There are truly more hands pushing the cart down the hill, which of course, will only add to the chaotic scene of running up the hill when a serious short covering rally does appear. The bears can gain the upper hand by driving these markets into new lows at week's end but will have to convince traders that they are not selling the bottom, otherwise known as the big empty.
