Reading the market's signposts
By Ben Levisohn
Produced By Austin Cornelio
So much for fundamental research. The Standard & Poors 500-stock index is down 46% from the all-time high of 1576 it hit back in October 2007. At every step of its seemingly endless decline, investors have been told one thing: Based on the fundamentals, stocks are cheap. Yet shares continue to fall.
another way to analyze the market that can offer insight into such turbulent conditions. Technical analysts look at trends in stock prices and trading volume to discern whether investors are likely to continue selling or may be ready to reverse course and spark a rally. On Nov. 20, when the S&P 500 plummeted through its 2002 trough to close at an 11-year low of 752, they didnt like what they saw. Says analyst Todd Salamone of Schaeffers Investment Research: Weve entered a "black hole".