Waterfall
Well, it didn’t take long for the
market to follow the script from my last
report. The
ink was not even dry before the market started to proceed with the
“waterfall” type action I told you about. Once the support levels I
outlined were breached, there was only one
thing the market had left to do…yoink!
Now what?
In the short run, maybe the market bounces a
bit…possibly 8100-8200 on the DOW
and 860-870 on the S&P500…both are areas of resistance where the market
just broke down from. After all, put/calls
have been above 1 for several days
indicating a near-term bearish tone by the wrong-way crowd. But I expect
any rally to be anemic as the technical condition of stocks is about
as ugly as it could be.
Once again…here is the evidence.
- Major indices are trading well below their respective
200-day averages. - World markets are going along for the ride. In fact,
Europe is at six-year lows, and
Japan…well, Japan remains at 20-year lows. - THE NEW HIGH LIST…what
NEW HIGH LIST? There isn’t any. - THE NEW LOW LIST has
expanded tremendously over the past few days. - I am down to one group that is showing strength…GOLD.
How exciting! - Volume picked up on the latest drop…indicating
conviction in the selling. - My best guess is that 90% of all stocks are now in a
downtrend. - I can count on one hand the number of stocks that look
buyable. Unfortunately, in
this market most stocks that were buyable are now toast. - Every article in Barron’s this weekend was
bullish. (One of my funkier indicators.)
There’s more, but I will end it there. Continue to stay on
the defensive because I believe
there is more of this “waterfall” to come. In fact, I believe
last week’s action was a “mini-waterfall” compared to what I think
can really happen. The DOW
is still a few hundred points from the low…and odds
favor the market is going there.
That leads me into my next report. I have mentioned on my
radio show for about two months
a theory on how this market plays itself out. I have been hesitant
to write it up because I don’t like getting ahead of things. But the
market is following this theory to a tee. It
involves double bottoms, panic selloffs
and October. The report will be about facts, chart patterns and history…and
yes…history does repeat itself. Stay tuned.