Those traders and investors that believe the New York Composite Index ($NYA.X) is the most pure depiction of "the market" are watching things closely here at 615.
NYSE Composite Index - last ten months
I believe that the NYSE Composite is probably the most representative of the "true market." The exchange has more stringent listing requirements and order flow comes to one post. A "true market" where buyers and sellers come together. No multitude of market makers trying to jerk stocks around for their own purposes. Institutional money runs deep here. Some fund managers find it hard to even think about buying stocks that have more than three letters.
The current chart and trading level of the NYSE Composite (NYA.X) looks to be a better technical short than it does a long at this point. The nasty downward trend just above and 50% retracement at 615 will have bearish traders searching for weak stocks that are listed on the exchange. I want to stress WEAK stocks. A market bear knows all to well that it is easier to feast on a stock that shows lack of sponsorship that has rallied to a level of resistance than it is to try and short a stock that has its supporters.
I feel and think others will agree. A trader that is willing to short/put stocks is like a lion. If you've watched the Discover Channel, you undoubtedly have seen a lion perhaps stocking a herd of water buffalo. The lion seeks out the weakest buffalo in the herd and attacks it. The lion does not go after the herd bull that is the dominant player and try to prove a point.
One stock I've talked about recently that I think fits this description in shares of ACE Ltd (NYSE:ACE). The stock recently gave the bear signal reversal pattern on its point and figure chart at $35 and resides in the Insurance group. This is a group of stocks that recently turned lower on its bullish percent charts from the 74% bullish level (overbought) and now resides at 60.48% bullish. To me, this is the type of stock to be looking to short. A group that was overbought, and a stock that showed early weakness.
With bond YIELDS still in the red today, there still doesn't appear to be a lot of money coming into stocks, though we are seeing some gains in the broader indices. I still think a trader should be looking at both sides of the market in here. Short the weak ones and buy the strong ones.