When we are Grandparents

They will recall the history of when Bear Stearns lost 99.9999% of it's value in the brutal banking bear market of 2008.

But somehow, the market managed to rally today from a 200 point deficit, what gives?

On my March 7th entry, I stated how I could see a situation where there was a run on the banking system, but the equity markets would refuse to go lower. Can anyone deny there is a calamity in the American banking system currently?

I've spent plenty of time analyzing the psychological reasons why I feel we are near a bottom in this sell-off, let's spend some time analyzing the technical situation now facing the bears. (people who expect the market to go lower)

I am a big fan of divergences, a divergence is when (in this situation), the market makes a low, followed by a minor rally. Technical indicator's, MACD, Stochastics, whatever you might be familiar with, head lower and confirm the low and then rally's in conjuction with the minor rally in stocks.

The market then resumes it's downtrend making a new low, your technical indicator (see above), also moves lower, but fails to move below it's previous low and does not confirm the new low in the equity you are following. That, is a divergence.

Currently, there is a potential for a bullish divergence on a 60 minute and daily chart of the djia. In conjuction with that signal, the weekly and monthly charts of the djia are both oversold.

Tommorrow, there is a high probability that the equity markets will rally, a cut in interest rates by the Federal Reserve, couple with the IPO of Visa Corp. and a potentially bullish report by the bellweather Goldman Sachs, could act as a pressure relief valve for equities. (causing the djia to rally)

If my presumptions are correct, the MACD or Stocastics would move higher, confirming the bullish divergence on the 60 min and daily charts. A possibility of reversing the over-sold conditions on the weekly and monthly charts might also be in the cards.

Do not, under estimate what a bullish divergence would signal for the djia, they don't happen very often and are readily recognizable by a multitude of investors.

The psychological indicators, couple with the technical indicators, offer the possibility that a significant rally in equities could take place in the very near future. (hours or days) In addition, the inability of the djia to move to my first level of significant support 11,300 indicates that something is going on that is preventing stocks from heading lower.

11,300, would be a logical place to have a stop loss order on any aggressive position someone might put on. (risking a few percentage points in potential losses)

For the more passive, I expect a rally that will be met with plenty of skepticism, followed by a break in prices that will provide a nice entry point.