The positive right now is that stocks and the indices are still sitting at oversold 
levels, and that is likely to continue to lead to more upside in the short-term.
Longer-term indicators, such as the ratio between stocks
and bonds
, have also reached a historical extreme. This indicator is showing extreme pessimism by stock investors that have flocked to the safety of the bond market. Currently, this indicator is showing that stocks are very undervalued
compared to bonds.
That may give investors some comfort, but looking at the indices from a short- to intermediate-term outlook, it doesn't look very encouraging. You can see that the
Dow Jones Industrials (DJIA Quote - Cramer on DJIA - Stock Picks) put in a short-term double bottom and are now bouncing higher.
Since we were so oversold, it is likely that the price will move up to the 12,750-13,000 area before resuming the downtrend. You can also see at the bottom of the chart that the institutional
money stream remains well below the downtrend line.
The
S&P 500 (SPX Quote - Cramer on SPX - Stock Picks) is almost the exact same picture as the Dow chart. The waterfall selloff came on very heavy volume, and although we will likely see bounce up into the 1400 area, the downtrend continues to remain intact. The key to watch will be when the price gets up near the resistance. If the volume starts contracting while price is moving up, it will be a sign to exit any short-term long trades
The
Nasdaq Composite (IXIC Quote - Cramer on IXIC - Stock Picks) also has a tremendous amount of resistance below its current support in the 2500 area. You can see at the bottom of the chart that the institutional money stream has been very weak and has a lot of ground to make up before we can say it is in any type of bottoming process.
Mark Manning
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