Dead Cat Bouncing?
    Anytime the DJIA rallies 215 points in one day, you must be impressed. While I will take the gains when the come, this looks to me like a dead count bounce. Even though we closed up on high volume, the NASDAQ, S&P 500 and DJIA all remain below their 200 day moving averages. Deeper, Apple (AAPL) and Baidu.com (BIDU) failed to overcome key resistance levels. Further, the DJIA and S&P 500 are developing clear descending triangles. The descending triangle is a bearish development that occurs  when a clear downtrend intersects with support. For the DJIA, support serves as the August 16th closing low of 12,845 and the downtrend has been in effect since the market peak on October 9th. With a descending triangle, the direction of the market will not be determined until we see a dramatic break in either direction.
    All today’s rally did was pull us above support and move the DJIA within the triangle. Any rally that does not decisively overwhelm the downtrend will be viewed as a dead cat bounce. To prove me wrong, the DJIA would need to move above 13,200. To do so tomorrow, we would need a 250 point rally on the heels of today’s 215 point rally. I may be dismissive, but until I see the bulls prove they have staying power, I will believe we are heading lower.
I feel the same way, although I’m looking at it from a non-technical standpoint. Too many people were short the market, so it was easy for a short squeeze to occur. The fundamental problems still exist in the economy, and for that I’m still remaining on the sidelines until I see a good enough reason to re-enter the market.