It looks like the other shoe dropped this week. Just when everyone thought that we may have heard the last of the financial sector’s woes, more bad news hit the wires. The question is how many more shoes are left?

For a time, the market could shrug off negative news. Starting last week, the market was oversold and there was just too much negative news from the banks for it to ignore. However, for the time being, the bulls have held the line. Although there is still strong evidence to indicate a market bottom was established in November, that does not mean one should stay married to that opinion should conditions change.

The question that is constantly asked is “will there be a retest of the November lows?” The breaking of support this past week on all of the major indexes (8500 on the DJIA, 850 on the S&P 500, and 1500 …

At this juncture, it is difficult to make a reasoned judgment regarding near-term market direction. The current market rally may be in jeopardy and we may soon retest the lows set in November. The other possible scenario is that the market may be experiencing a brief respite before the trend resumes. While this uncertainty might cause one to throw up their hands and give up, it is essential to continue analyzing the market!

Last week, the McClellan Oscillator indicated that the market was extremely overheated. In all fairness to the indexes, the S&P 500 and NASDAQ were both up over 20% from their November lows, so it makes sense for them to lose momentum. Many were expecting a large bear market rally sooner rather than later (myself included). However, the new year is young and anything can happen.

One concern for the S&P 500 is that the current rally broke through its …