Wednesday, August 10, 2011 4:15 PM – Retesting the Lows

I wrote yesterday that generally when a high volume, high fear day seems to indicate that a selling climax has occurred the market will then go higher and in 2-4 days revisit that low. This is called a retest of the low and one must wait a day or so to see if the original low holds or the market breaks down through it.

Today the S&P 500 closed at 1,120, exactly the same day as Monday. That retest is at least a day earlier than I expected but here it is.

The S&P 500 finish was down -4.4% for the day. The DJIA was down -4.6%. Small stocks, down 5.1% finished a little higher than the Monday close and that is a good sign. Gold was up 6%. Gold stocks have finally decided to move more like gold than the stock market. It’s been a long time since that happened.

Stay tuned.