You would think one of the worst one-day losses would bring about some interest on the part of traders or at least push markets into oversold territory - but neither happened. The former you could argue against with a sizable surge after days of limp volume, but volume was well off the frenzy of a couple of weeks back when the background news turned into the forefront news. More worringly, none of the markets turned oversold and breadth indicators remain frothy, especially the Summation Indices. NYSE has a stochastic reading smack bang in neutral territory; there could be a lot more selling to come: Bulls might have found one of Oasis of hope - the Transports; an important leading index from a bottom I now return to my vacation... Get the Fallond Newsletter Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, market alerts and stock charts website

Gone quiet for the next two weeks while visiting family. This volatility needs to dry up before we can define some boundaries. -eom- Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, market alerts and stock charts website

Another day of link-love, this time from TraderMike , brought a second spike in blog volume. If you are interested in an article I wrote on blog volume and market reversals you can get it here . -eom- Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, market alerts and stock charts website

Yesterday was a whopper for the bulls, but there may be enough squeeze room for a retest of the week's lows next week. Why? Looking at the weekly spread of indicators, other than the VXN there hasn't been the broad level of confirmation typical of a weekly bottom - particularly from the Call-Put Ratio. Obviously, based on my prior post none of these need to drop to levels where typical bounces occur, but it would be more comforting to have at least 3 of the 5 at historical bounce zones. Next week could be the week which does it, but this could mean another week of losses. Get the Fallond Newsletter Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, market alerts and stock charts website

Speaking of blog traffic and capitulations . A big Thank You to Charles Kirk of the Kirk Report ; 90% of my traffic yesterday was from his link: -eom- Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, market alerts and stock charts website

As TraderMike noted, many of the indices have yet to reach short term oversold levels on full stochastics which suggests any rally from here will likely get sold off. Mike also reported on the capitulation spike in the VIX and the T2108 indicator, the latter broke the '20' barrier typical of bottoms. Also contributing to the malaise is some lackluster breadth levels. iBankCoin reported on the relatively high value in the number of S&P stocks above their 50-day and 200-day MAs - the latter in particular. The shift in character of these indicators from 2006/07 to late 2007/08 reflects the move from bull to bear market; in bull markets fewer stocks break these moving averages before buyers get antsy about missing the next leg of the rally - in bear markets there is no such willingness to jump in so greater number of stocks give up these key moving averages. There is no shortage of warnings about Wednesday not been a bottom; InvestorPlaceBlogs were unconvinced even with th

Since the short to intermediate term picture is so mixed; oversold in the short, yet strangely overbought in the intermediate, I decided to take a step back and look at the monthly chart. There is evidence the S&P is shaping some form of cup-and-handle pattern, or at least a handle which will evolve sideways if not higher. For this to be true there are three watch areas. The first, 1,264, was blown away this week. The next, 1,177, is the scene of the current fight with the index getting close to this low yesterday. The third is 1,090 which will be the last chance saloon for the pattern. As I prefer to use the candlestick real bodies to define my anchor points, those who use all price points would have the three watch areas at: 1,273 (Busted), 1,179 (current test), and 1,084 (Next). Obviously slightly different to the above values but in combination can be considered support bands. Get the Fallond Newsletter Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock a