Support is for Jock Straps

The stock market keeps grinding lower as fear of Rita continues to climb. The NASDAQ hit 2109 as we had predicted which represents the first good line of support. Unfortunately the lack of interested bids is failing to provide any meaningful bounce from that level. Small Caps and Semiconductors continue to hover near the lows of the day and are also not attracting any buyers.

The Volatility Index (VIX) which measures fear and complacency is showing a high level of anxiety but no outright panic. The decline in the stock market can be described as orderly. Trend lines can be drawn that would connect lower highs and lower lows. Unless we see a rinse to the downside to negate this pattern, we are not willing to enter any long-side trades. A spike in the VIX accompanying this hypothetical rinse in the averages would be more along the lines of what we're looking for.

Hitting the NASDAQ 2109 support level may still attract some late buyers into the close if it appears that the NASDAQ will close higher than that. Their claim will be that a double bottom and retest has occurred. While it is possible that this can morph into follow-up buying tomorrow, we are confident that the Bears will maul them on any noticeable strength.

Simply put, in observing the internals and stock market action, it has become evident to us that a little more capitulatory selling needs to take place before the market can earn our trust and our cash.

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