The low in in. While the recent negative reading in the 10% Index of the MCO suggests the markets will need another retest of the low, it does not mean we have to revisit the low price zone, nor does it have to happen right away. A degree of caution remains prudent, as the markets are skittish and responding to negative news badly.
With the MCO approaching the zero line and the SPX approaching the 200 day average from below we could see a slight hesitation on Friday before the three day weekend.
Never the less, the zig-zag in the MCO is being confirmed by all the other market internals and the possibility for a very strong rally is very high. Adding to the technical picture, the sentiment indicators are wildly negative.
As of 5/26/2010, AAII members are:
Bearish: 50.88% <-- blood in the streets type fear.