Of the last several weeks, I have suggested that markets are oversold and that a bounce was likely. However, such a reflexive bounce should be used to sell into as it is now becoming clearer the markets have changed their trend from positive to negative. As I discussed earlier this week:

“The concept of the full-market cycle is critically important to understand considering the markets have very likely broken the bullish trend that began in 2009. Take a look at the first chart below.”

“This “weekly” chart of the S&P 500 shows the bullish trends which were clearly defined during their advances in the late 1990’s, 2003-2007 and 2009-present. Each of these bullish advances, despite ongoing bullish calls to the contrary, ended rather badly with extremely similar circumstances: technical breakdowns, weakening economics, and deteriorating earnings.

As I have shown in the chart above, when the markets broke the bullish trends (blue dashed lines), the subsequent bear market occurred rather rapidly. The conversion from the bull market to the bear market was marked by a breakdown in prices and the issuance of a very long-term “sell signal” as noted in the bottom of the chart.

We can look at this same analysis a little differently and see much of the same evidence.”

“The chart above shows something I discussed last week: ‘Markets crash when they’re oversold.’”

The inability for the markets to muster a rally from currently extremely oversold short-term conditions suggests market dynamics have indeed changed from a “buy the dip” to “sell the rally” mentality.

This weekend’s reading list is a collection of articles on the current state of the market. Is this just a correction within a bullish tend? Or, is this the beginning of the long awaited bear?