Friday, January 16, 2009

Large Strong Rally Phase Underway; Jan. 16, 2009

The market rallied too much since my previous post for the count to remain valid. It's clear the decline was impulsive, but the exact labeling was uncertain. So I relabeled the decline to show 5 waves down complete already. This is probably a wave 1 at some degree. Which means that a strong fierce wave 2 should occur now. This lines up perfectly with Obama coming into office Tuesday, and the Obama euphoria carrying over to the stock market and causing a rally. But 943 in the S&P cash should not be broken or even tested. My projection in the coming weeks is shown in the 1hr chart above. I see a 1-2 week rally occurring to just under 900 in the S&P. I took off some of short positions yesterday and today once I saw the selling pressure alleviate. So I will add those positions back on as this market rallies higher in the coming days/weeks. Ultimately, 943 should not be broken, and the market will give way to a large wave 3 down. That will be the prime opportunity to make big easy money fast!

I'll try to identify a top when it comes, but I'm shorting this coming rally anyway.

Stock Market Declining in 5; Jan. 16, 2009

Yesterday's sharp rally is typical in a bear market, but appears to be short lived. With the decline this morning, it has created a clear 3 waves up on all the major indices. It could unfold in a more complex correction by rallying more, but it will be just that, a correction. The above chart shows a possible 5 wave decline unfolding. It's even possible to count the drop into yesterday as a 5 wave decline, which would have the rally yesterday into this morning as a wave 2 rally. But that would mean we're in a wave 3 down now and the market internals and movement does not support that. So I favor the above count for now.

Nothing has changed in my forecast. The market is on its way to breaking 740, the low of 2008.

Wednesday, January 14, 2009

Massive Selloff Possible Tomorrow, or Later This Week; Jan. 14, 2009

The market's internals today finished horrid, but slightly better than I described in the middle of trading today in my previous post. The calm and orderly nature of the selling is the worst scenario the bulls can get. Panic selling and chaos usually creates bottoms, whether short or long term. That didn't happen today. Not only that, but a late day rally in the final minutes pushed the indices off their lows. Again, this is not good for the bulls in the very short term. Because of this, I feel any rally this week will be short lived and quickly reversed and new lows made. The longer the panic and fear stays out of the market and the selloff stays this orderly, the more likely this market will continue much lower in the coming weeks with little rally relief.

Above is a daily S&P cash chart showing the break of the important 850 level which has held the market up several times in the past. The market has told us this is an important level. So today's strong break on weak internals and close beneath it tells us the market wants to go much lower. Also notice the MACD has shown weakness (red descending trendline) throughout the entire rally phase over the past weeks and is now rolling over to the downside. There is still plenty of room for the MACD to fall too, along with many other momentum indicators. This market is overall bearish. 740 will be broken in the S&P soon, and will probably trade well into the mid-600s by summer 2009!!

I'm still about 75% short overall.

Market Internals Showing Extreme Weakness; Jan. 14, 2009

The market's internals are extremely weak as seen from my Scottrade market insight page above. You can see that NYSE decliners are outpacing advancers 11.5 to 1. Down volume represents a whopping 97% of total volume! Also notice above that of the 500 stocks on the S&P 500, only 16 are trading up today.

This extreme weakness shows absolutely no one is buying at all today. Seeing as that the S&P broke its key level of 850 with internals like this, it's extremely bearish and ultimately confirms that the charge to below 740 is underway. It won't get there in a straight line, and with horrible breadth like we have today, I wouldn't be suprised to see a snap back rally start tomorrow. This is not a prediction, but just acknowledgement.

If we get a major selloff into the close today with the S&P down more than 33 points, then I will take more profits on some of my positions. With such a constant and large decline like we've had the past week, I'd be a fool not to take some profits off the table.

The March to Below 740 is Underway; Jan. 14, 2009

I was wrong in expecting a rally in my post yesterday. But with the larger trend down, suprises will be to the downside. The break of 850 in the S&P (see red horizontal line on chart above) confirms the march towards breaking 740 is underway. The market won't get there in a straight line, although it has so far, so I'm taking small short positions off the table as the market falls. When the market rallies, I'll add those positions back on. This is the 7th down day in a row for the Dow and no significant rally has occurred while the S&P has dropped almost 100 points! So a strong rally should occur soon. But it's not required.

740 should be broken within the next couple months.

Tuesday, January 13, 2009

Rally Expected; Jan. 13, 2009

The market has been under severe pressure the past week or so, so it's likely a rally will occur. We might be due for a wave 2 that will take the S&P into the 900 area again, but well short of 943. This is all just a guess though and not a prediction. Any significant rally will just be looked at as an opportunity to add to my short positions.

The trend is down, and the low of 740 should be broken in due time.

Monday, January 12, 2009

Stocks Continue to Weaken Suggesting a break of 740 is Near; Jan. 12, 2009

Stocks continue to weaken since the high of 943 in the S&P, with little reprieve. Currently the S&P is at 879. A break of 850 will all but confirm the charget to below 740 is underway, and that 943 will not be exceeded before that happens.