There was lots of talk yesterday about the direction of the economy from the President Obama, Federal Reserve Chairman Ben Bernanke, members of Congress, and numerous economic advisers. But the market has an answer of its own.

We took note of the breakdown of the S&P 500 in Monday’s Daily Market Outlook, so let’s turn our attention to the Russell 3000.

The last time that we looked at the chart of Russell 3000, which includes about 98% of all U.S.-traded stocks, was in late May, when three bullish flags appeared to be telling us that all was well. But the failure of a fourth new high in May, along with the penetration of the April lows last week, confirm that the S&P 500’s breakdown was no aberration.

But every downturn has its “dead cat bounces,” and the Relative Strength Index (RSI) on both indices is warning that a bounce could come soon. Note the Russell’s RSI in red now at 34.55. The only other time this year that the Russell has recorded such a low reading was in March.  

If we get a rebound, don’t be sucked into thinking that the downtrend is over. In order to neutralize the breakdown, both indices would have to break and hold above their respective 50-day moving averages (blue line) — a highly unlikely near-term event.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.