JP Morgan announced Sunday that it will be acquiring Bear Stearns for just two dollars a share. This will likely spur a downfall in the market on Monday as the economic situation continues to be proven worse than initially and commonly thought. However, the Fed meeting on Tuesday could caution shorts from being too aggressive.
We're now down three weeks in a row on the S&P and Nasdaq. If we get beaten down this week as well, I might consider buying the Nasdaq for a mean reversion trade. Typically, the broad indices bottom out (short term) after 4 weeks down in a row. This is a result of overdone negativity where sellers get worn out and overextended.
This market's theme continues to be sell strength and buy extreme negativity. This will continue to be the case until there is either signficant fundamental change or financials regain their leadership position.
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