What a Week: Growling Bear

Updated from 4:51 p.m. EDT

The Rolling Stones classic Let It Bleed would have been an apt soundtrack for this week, one in which the Nasdaq Composite slid to its lowest levels since October while the Dow fell below the psychologically significant 10,000 level. The acceleration of recent stock market weakness came amid some disappointing earnings news, hawkish comments by Federal Reserve Chairman Alan Greenspan, and concerns about terrorism ahead of the upcoming Democratic convention.

For the week, the Dow Jones Industrial Average fell 1.8%, closing Friday below 10,000 for the first time since May; the S&P 500 lost 1.4%, its sixth consecutive losing week; and the Nasdaq Composite shed 1.8% to 1849.09 on Friday, its lowest close since Oct. 2.

In the "Gimme Shelter" department, Rick Bensignor, chief technical strategist at Morgan Stanley, does not think this week marked the end of the decline, even though the S&P managed to hold above its year-to-date low of 1076, a minor technical victory Friday in an otherwise destructive week.

"We could get a bounce, but I don't think the downside game is over," said Bensignor, who forecast a harsh selloff two weeks ago, as reported here. "I think we're still going lower."

Bensignor's continued bearishness is based partly on a sense that skepticism remains the contrarian view. At recent market bottoms in March and May, he noted, the CBOE Market Volatility Index was in the high 19s; the VIX was under 14 this week and ended Friday at 16.44 after a 4.4% bounce. Similarly, the spread between bulls and bears in Chartcraft.com's Investors Intelligence survey was much narrower at those prior bottoms vs. the most recent reading of 52.6% bulls and only 20% bears.

"There's much more complacency about this selloff -- everyone is assuming we'll come to the low end of the [trading] range and pop up," he said. "It's as if people aren't that concerned."

Besnignor has been and remains concerned, suggesting the S&P 500 now has downside risk to 1056 and possibly 1025 beyond that. "Now is not the time to put money in," he said. "You should be able to buy at lower levels."

While fear remains elusive, presumably this week will move more people to the bearish, or at least cautious, camp. Clearly, it was a difficult week for those who've been expecting a summer rally, myself included.