The Retest Is Key

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Ah, the old retest. That's what this tape wants. We have to revisit the lows we saw this morning before anybody really wants to come in. We need more pain, more fear. Despite the heavy drop, we're still getting a lot of complacency. And a lot of hesitation.

That hesitation might explain why relatively small-time speculators can sell 200

S&P

futures contracts and trash the market. Is it still going according to plan? We've had a quick downdraft, squeezed some shorts while heading higher and now we are retesting. This is the kind of thing that you have to expect after a day like yesterday.

The concept of a selling climax requires more intense fighting for position. We saw some of that this morning, but after a mixed battle the combatants seem to have pulled back from the fray.

For what it's worth, in this information void, my technical brethren are in charge and their obsessions with 200-day moving averages are more important than same-store sales, stronger-than-expected earnings or reiterated buy recommendations from Wall Street analysts.

Right now, nobody's ecstatic. The shorts want more pain, the longs want a more decisive snapback -- and neither is happening. The Trading Goddess, in a rare visit to the office today, told me that if you're short, you probably want just one more big downer in order to cover. But that desire is becoming more of a hope, because the downward momentum, while still evident, has most definitely diminished.

Still, in this market owned by the technicians, diminished downward momentum is hardly a reason to get pumped. A few incredibly disturbing signs persist, especially an advance-decline line that is yucky and a

Russell

that is just plain sinister. How bad is the Russell 2000? Even during this morning's brief upturn, the Russell 2K remained down, down, down. Is there any magic bullet to turn those around? I don't see one.

James J. Cramer is manager of a hedge fund and co-chairman of TheStreet.com.

Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column by sending a letter to TheStreet.com at

letters@thestreet.com.