When large numbers of buy signals start to fail, that’s usually a pretty good indication that a bear market has begun. On Friday some short term buy signals aborted, and more are in danger of doing so if the market breaks support in the 1400 area. But those short term buy signals are still in position to retrigger and 13 week cycle indicators could also turn up if the market rallies.
The market is technically positioned to have a decent sized move either way. How apropos with the election looming on Tuesday! The market wasn’t happy after the disputed result of the election of 2000, but the Fed was still withdrawing liquidity from the Primary Dealers at that time. This year the Fed is adding cash to Primary Dealer accounts via the MBS reinvestment program, and in addition, the settlements of the QE3 transactions will begin on November 14 (See Fed Reports for details).
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