S&P 500 chart

A few days ago in my "DJI Chart" post I have pointed to the possibility of indexes running to the new level which was confirmed by the further recovery. Now, at the end of the week the odds of the correction down have been increased. A month of strong recovery (with the small correction on March 19-20, 2009 only) have been pushed market into the overbought condition (at least for a short-term). Even if stock market is not any longer in the recession, for healthy recovery at least some small corrections are needed and sensitive level drown by me in my previous post is on my opinion a level when we may see at least flat market or correction down.

Technical analysis, based on the standard indicators I usually use, show the buildup of bearish sentiment. All technical indicators (SBV,Advance Decline, Stochastics, RSI and McClellan Oscillator) on the S&P 500 chart below are bearish. If you apply the same indicators to the Nasdaq 100 and DJI indexes you may see similar picture.


Now taking look back on February 9 – March 6, 2009 decline I would separate this decline from the recession and global stock market crash. I still consider that the stock market crash ended on November 21 of 2008. By that day everything was crashing down. Yes, S&P 500 and DJI indexes dropped below November 21st lows, however since then the indexes are not as volatile as they were before and some of the indexes (Nasdaq 100, S&P 400, Dow Jones Utilities...) remained above or at the November 21st lows during the February 2009 decline. I would more consider the February's decline as levelling when some of the companies (financial, automakers) still had to go down while other market sectors (computer, telecommunication, biotechnology, etc.) already hit the bottom and during February 2009 went down only because financial and automakers sectors are very big and their trend influences other companies. Yet, I could be wrong and I would not go deeper into fundamental analysis – this is not my field.