The Bear Market Daily News

The above chart of the S&P 500 (SPX) tells me a thing or two about Bear Market Rallies; they are sharp and short-lived. Apparently, the index needs to rise above 950 to establish new 65-day high as illustrated by the horizonal blue line drawn at that level. An ascent to that level mind you would be an amaziing stride -- what would amount to the strongest, most impressive rise in stock market history.

Also, take a look at the lower studies in Volume and RSI. The pattern indicates that decines have resulted from high trading volume while rallies stemmed from the complete opposite; low trading volume. Finally, RSI, the Relative Strength Index is choppy. Technical Traders like myself would like to see a developing pattern of higher highs and higher lows more consistently over the course of time.

Could it happen? Sure, but realistically, It's unlikely in my view. My reaearch tells me that a new bull market will not magically appear out of thin air. Rather, a more likely scenario would be the market forming a base over the next few months. I subscribe to the theory that if you want to thrust a powerful rocket, you'd better build a better launching pad. Well, that base would create a fine platform for a Bulls "lift-off" but not until later this year.

Of course, there's a bullish case as well. You'll find one over at The Bull Market Bugle on Squidoo.

Chicago -- They are the epitome of trader dedication; the unwavering and unaffected raiders of the lost Bull market. Steadfast and true in their resolve to conquer The Bear, they conger up the nerve to unleash their technical prowess -- All in the name of not losing one's shirt.

Who are they, Santelli's Army? Well, they very well could be. But for the sake of this article, I will refer to them as the brave souls. Their secret weapon: The VIX (CBOE Market Volatility Index).

Trading in a Bear Market is never easy. But, given present market conditions and casino-like environment that have become evident on Wall Street (film at 11), let's take a closer look some trading tools and technical indicators that you may want to consider while playing the game. You are playing to win, aren't you? Great, because these technicals can help prevent any misguided trading decisions and at minimum, give traders a grasp on market sentiment -- very important these days, but not neccessarily how one might think. (More about Market Sentiment in a future article.)

The VIX for example, is our 'fear indicator' and if you're on the battlefield, you best pay attention to this 'General' indicator that suggests when to advance and retreat. I say that because generally, and you've probably heard this before; "When VIX is high it's time to buy, when VIX is low its time to go!" Of course, it's not always true however, as the VIX is described as a 'mean', that is, as defined in Webster's Dictionary: The mean of the absolute values of the numerical differences between the numbers of a set (as statistical data) and thier mean or median. Sound familiar? Maybe not, but I can give you a clue: In a battlefield called Las Vegas, the house always wins.

Do you see where i'm going with this? Bears and Bulls unite... It's Time to Go to War!

Yes, I said go to war, not against each other, but against conventional wisdom itself. The facts are becoming more crystal clear everyday.The game has changed. The 'house' may or may not be rigged (who am I to say). Regardless, you'll need some heavy artilary in your trading arsonal to win the battle. Not kidding; my belief is that if you're going to participate in this incredibly volatile Bear market, especially newcomers, it's impairative that you put the law of averages in your favor. Otherwise, hire a broker or subscribe to a service who understands this logic. If not, most likely it'll be bye, bye, nest egg or worse! Then again, people do get lucky from time to time. It happens in Vegas. Just remember in that sense, the odds are seriously stacked against you.

Back to the VIX. Thank goodness, back to reality. You can gain a better understanding of this fear indicator by watching a nicely presented CBOE Video on the VIX. It goes great with a cup of coffee and a Squidoo lens called The Bear Market Daily News, ha!

Chart Illustration: VIX as of 02/23/09