I don’t know about you but I spent the day watching various new coverages (Fox News mostly) on the Bhutto assassination and the stock market was the last thing I thought about today. That was, at least, until the final hour when stocks started to selloff in a very strong mini-collapse in the final hour. They say the last hour of the day is the time when institutions make their biggest trades. If that was the case, this time, then they sure weren’t buying anything and were selling everything.
The comfort amongst the selling was the fact that volume was so much lower compared to the 50 day volume average on the NYSE and the Nasdaq. But volume did pick up from the day before which gave the market another distribution day making it the fourth one for the Nasdaq since the November 28th follow-through. The NYSE, SP 500 and DJIA all have three since then. So the market appears to be under some pressure after just a little bit of selling once again. This is one unfriendly market and I simply find it almost IMPOSSIBLE to believe there will be a long-term rally from here.
Fortunately, I have learned to realize that when I feel a certain way I am usually wrong and it either marks a top or a low. But this time I have some technicals on my side and we must not forget I have been in sync with the market since 1999 and have NOT missed a SINGLE TURN during a top or bottom. I left NYC “KNOWING” that we were putting in a real top and I still believe we are going to do the same thing now. But if I am wrong, all I ask is that I get max green BOP filled charts that act like my past big winners have acted. If that happens I don’t give a damn about being wrong. As long as I am making money, how can I be wrong?
The market is a wild beast right now and the most important and simplest thing that I am noticing right now as I stare at my Nasdaq chart is that I see a possible double top with the index stopping right at the 50 dma again with volume picking up. My moneystream indicator is showing a lower high while the RS line hit a lower low on the leg down in December to November. These are slight negative divergences and further selling in the Nasdaq should be watched.
The NYSE, SP 500, SP 600, and DJIA are all in a bit of worse price action with each high from early October being lower and lower with today’s price reversing at the 50 and 200 day moving average which is all bearish price developments. Just like the Nasdaq, all of these indexes must be watched as this price action is coming with three distribution days.
I gave you my bullish scenario yesterday and I am laying out the bearish scenario today with the poor price action we saw today. Another thing you might want to take notice with is that the higher lows and lower highs are making triangle patterns in many indexes and since the trend is already down from the July highs in indexes like the Russell 2000 and SP 600 the pattern is usually a continuation pattern that suggest prices will break lower once it is complete.
I don’t know what else to tell you all but that you should keep your head up, continue to review those past big winners as I add them, and remember the great bullish green volume and BOP filled charts WILL return. I don’t know when and it could be a long time but they will return.
Due to the action in the markets today and the tragedy of what happened in Pakistan, I will pen a very long weekend commentary.
For tonight, If I can think of anything else to add I will come back and throw it in. But I believe I want to just relax and read a lot of political blogs tonight to learn everything I possibly can about this situation. Knowledge is power in all walks of life. But oddly enough in the stock market, as in life in general, if you keep it simple it works out much better. Knowledge may be power but you only need to use a bit of it to make a mint. The rest just makes you feel good knowing you know the truth. And the truth my friends shall ALWAYS set you free.
I love you all and wish you the best in the New Year. I will pen a post tomorrow and hopefully our longs and shorts will continue to reward us, despite the rough year 2007 has been. I know some of you have had a great year but for the majority of individuals I know on a personal level, this was one of the worst years since 2001. I agree with them. Hopefully, yours was better than mine and we have one more day to salvage an odd year.
The best thing though….the for sure first back-to-back monthly losses will definitely not happen and my streak of not having two losing months in a row continues. I had four losing months and eight winning months this year. The winners still beat the losers by a wide margin despite this being the first year since the early 2002 period where max green BOP filled charts vanished off the face of tcnet/tc2007.
Aloha and I will see the few of you that are coming in the chat room this week in there tomorrow! Aloha!
