Sept. 12, 2008; Markets on Hold 'til Monday

Last night news came out that Lehman Bros. is trying to get itself sold to another bank and it's rumored that the government will once again use taxpayers' hard earned dollars to bail out billionaires like they did with Bear Stearns, Fannie Mae, and Freddie Mac. The decision is likely to come Sunday which sets Monday up for a wild day in the markets. So today, people are just speculating on what will transpire over the weekend and are positioning themselves for that news on Sunday. So I don't expect much of anything from the markets today.

What I do notice today is that after today's choppy upward action, it illustrates that this rally is clearly corrective. The structure of the rally looks like it's weakening and its final stages that will give way at any moment, or will have on more quick "pop-rally" before rolling over to new lows. On the updated 15min S&P chart above, it shows a WXY combination correction. As you can see, the upward movement is very choppy with overlapping waves. It is not impulsive, so it is against the larger trend. This is a sign that the market is struggling very hard to make gains. Again, this tells us the rally is a countertrend move. Eventually, it will give way to the next leg lower. But it probably won't happen until next week.

I continue to patiently wait...

Sept. 11, 2008; Corrective Rally Ending

The market rallied after completing five waves down just like I stated earlier this morning (see previous post below). The corrective rally has satisfied all the requirements to be complete, so the next wave of heavy selling can commence at any time. Most likely tomorrow. Today's huge surge the last 30 minutes into the close was done with momentum indicators barely moving up at all, and a strong bearish divergence is building on the smaller time frames which should build into the larger time frames if the rally continues tomorrow. Also, the Dow rallied almost 200 points, but NYSE up volume was only 64.6%; decliners actually exceeded advancers so despite the market rallying almost 200 points there were more declining stocks than advancing stocks; and the NYSE was up only 0.68% today. This is not a strong rally internally. So again, rallies are accompanied by a weak demand to buy stocks, while selloffs are accompanied by a strong demand to sell stocks. When you combine this with the constant 5 wave declines I'm seeing, it tells us the larger trend is still down. And the building pressure of this choppy market should lead to explosion to the downside.

The key level is the top of the 5 wave rally in the S&P at 1274. As long as that remains intact, the proposed wave 3 of (3) down is underway. A break of that level will lead to a re-examination as to what exactly is transpiring. My guess is that the rally is over and tomorrow will be a big big down day. We'll see.

The chart above is the updated version of the S&P 15min timeframe that I posted in the prior post that shows the corrective rally complete and the next wave of heavy selling about to take place.

Sept. 11, 2008; More 5 Wave Declines at Various Degrees

The 15 minute chart above shows the S&P which probably completed a nice 5 wave decline this morning at the open. With 5 waves down complete, a rally should ensue before the next round of selling commences. Again, yesterday's pathetic rally was done on pathetic NYSE breadth, and the last hour of trading saw all the markets fall off a cliff. Today's early morning selloff was accompanied by NYSE declining volume at about 80% and 4.5 decliners per 1 advancer. Again, the trend of strong moves down and weak moves up continues. And now 5 wave declines are unfolding. The evidence is becoming overwhelming that wave 3 of (3) down is underway and should take off at least 2500 Dow points from the 11,800 high.

Wave 3 of (3) is Underway; Sept. 9, 2008

Today's reversal where the Nasdaq and S&P took back all of yesterday's gains and then some, and the Dow lost almost all of yesterday's gains, gives a strong signal that the big daddy decline is underway. Plus, last week's 350 point down day was accompanied by NYSE breadth that was extremely weak, signaling that the decline was very strong. However, yesterday's breadth was not strong at all, with only about 55% of NYSE volume going to the upside and less than 2 advancers per decliner. That's pretty pathetic for a 300 point rally. Plus, the Nasdaq 100 actually traded down yesterday. Then, today's reversal brought about weak breadth similar to last week's big decline with NYSE's declining volume at 88% and an astounding 7.09 declining stocks for every 1 advancing stock! This tells us the larger trend is down, and that trend is very strong.

On a simpler technical note, today's reversal of yesterday's big gains created a huge bearish engulfing candlestick (see chart above) on the daily chart, which is extremely bearish for the short term (next week or so).

The bottom line, with wave 3 of (3) underway, the market should be relentless in selling pressure over the next few weeks, and the S&P should get into the 900s soon!

September 8, 2008; Wave 3 of (3) is Underway

I took some time off from posting to tend to a personal matter.

Wave 3 of (3) is underway. The S&P and Dow are not tracing out 5 wave declines, but the Nasdaqs are. After the blue chips tested the daily trendline several times, both on top and underneath, the market finally gave way to a 350 point Dow down day. This was done with over 90% of NYSE volume being to the downside and over 5 decliners to advancers. Now that's a broad market selloff and characteristic of a wave 3. I'm looking at the Nasdaq Composit and Nasdaq 100 for guidance of the overall market, and both are showing tremendous weakness. Today's countertrend bear market rally is temporary and should soon give way to the next wave of heavy selling with a couple days.