Dow Breaks March Lows – Tests 2008 Lows

This looks bad for the bulls.  The Dow Jones Index broke its 2008 closing low today, and has broken its 2008 lows made in January.  The overall trend is down, and momentum appears to be accelerating.

The roughly 14% rally off the March lows has now been confirmed as a “Bear Market Rally,” in which it served sellers with a better opportunity to sell and tricked buyers into believing everything was ok with the market.

As of 10:30 EST, the Dow Jones was only 13 points away from making a new low for 2008, which would take us to a price low not seen since September, 2006.

UPDATE:  As of 12:15 EST, price had indeed clearly taken out the prior lows and made new lows for the year.

Momentum appears to be picking up to the downside, as this test became more evident as prices trended lower since the failure test at the 200 day moving average.  This was the next logical target for the market.

Instead of getting aggressively bearish here, we need to wait and see if these lows will hold, or if there will be some sort of surprise announcement by the Fed or the Government that will save the market once again.  In Janurary, it was the .75% rate cut.  In March, it was the Bear Stearns bail-out.

Let’s view the S&P 500, and note that it has a little more ‘room to run’ before testing and potentially making new lows on the year.

The chart is very similar to the Dow, only price has a few more percentage points to test ‘new price low’ territory.  The two S&P targets are the March closing low, and the March intraday low.

Also, these levels correspond closely with the 38.2% Fibonacci retracement on both the Dow and the S&P monthly chart, when taken from the prior ‘bear market’ price low to the 2007 price top.

Approximate 38.2% Fibonacci retracement levels from the prior lows:

S&P 500: 1,267
Dow Jones:  11,523
NASDAQ: 2890

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Both short-sellers and buyers need to beware, because anything could happen.