July 21, 2006 Stock Market Recap

The bears kept the pressure on the market on Friday. Volume increased but I think we can just blame that on expiration and not read too much else into it. What's key in my mind is whether the recent lows can hold or not. I don't expect them to, since as one of my favorite trading rules states, bear markets have no support. But who knows, maybe peace will break out and we'll get a flood of great earnings news to bring out the buyers.

The Nasdaq made a new closing low for the year but managed to hold above the July intraday low. It feels like 2,000 has to be tested at this point. After all, it's only 1% away. That psychological barrier should be a big test for the bulls.

The S&P 500 has just about given back all of Wednesday's big pop. On Balance Volume (OBV) is still showing a negative (bearish) divergence with price. Of course, the bulls would say that price is positively divergent. :-) I guess we'll see which viewpoint is correct in the near future.

Here's IWM, which is is the Russell 2000 ETF. That June low looks ready to break. If it breaks I think it could drop to the October lows (~620 on the Russell, ~62 on IWM)