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CNBC commentator and entertainer Jim Cramer declared an end to the bear market back in March, but I can’t see calling an end to the bear just yet.

Just take a look at the chart of the S&P 500 below.  The trend line that connects the highs from October and December is sitting just overhead in the 1407.50 range, as is the old support from the low in November.

I will agree with him that we were due for a bounce back in mid-March.  In fact, I wrote a bullish article in IDE back on March 17.  I cited the extreme levels of bearishness exhibited by the CBOE Equity Put/Call Ratio and the 21-day moving average for the ratio.  I also cited the highest bearish level on the Investor’s Intelligence in five years.

These were the drivers behind me writing a bullish piece back in March.  However, things have reversed sharply in these sentiment indicators.  The bearish percentage on Investor’s Intelligence peaked at 44 percent and is now back down to 31 percent.  Back in March, the bearish percentage was higher than the bullish percentage for five weeks in a row, but not anymore.  The bullish percentage is now at 41 percent, ten points above the bearish percentage.

The 21-day moving average for the CBOE Equity Put/Call Ratio peaked out at 0.93 and has now fallen to 0.76.

As you can see, the sentiment has reversed sharply as the S&P 500 approaches a critical resistance level. 

You should also note that the S&P is nearing overbought territory based on the 10-day RSI and the Slow Stochastics.

I should point out that I am writing this article ahead of the April Employment report.  The reason I say this is because an event like the monthly employment report could be what the market needs in order to break through this resistance.

All things considered, it looks to me like the market is getting ready for another down leg.  Between the dramatic shift in sentiment, the technical resistance, and the overbought levels on the RSI and Slow Stochastics, this is a lot to overcome.

I, unlike Jim Cramer, will wait to declare an end to the bear market.

Good luck and good trading,

Rick

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About the Author

Rick is currently the Editor-in-Chief of The ETF Options Trader and the Triple Wave Investor. At the age of 23, on the third options trade he had ever placed, Rick turned $1,800 into $22,000 in less than a week, when the company he bought became the target of a takeover. He admits it was a stroke of luck, but it was a memorable education as to the leverage that options can provide. He lives near Delray Beach, FL with his wife and three children.

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