When it was all over, the Nasdaq reversed a .9% loss to close .3% higher. The SP 500 and DJIA closed higher by .1%, the NYSE ticked a few points higher basically closing flat, and the SP 400 and SP 600 diverged closing lower by .05% and .15% respectively. The Nasdaq 100 gained .5%, leading the broad market. The IBD 85-85 index closed higher by .02%, failing to keep ahead of the Nasdaq but still keeping pace ahead of the overall market since the March 14 lows.

Volume was slightly higher on both the NYSE and the Nasdaq. Volume came in around 10% higher on the NYSE and 5% higher on the Nasdaq. Heavier volume, with today’s reversal is bullish for the short-term but the fact that volume is still well under the 50 day volume moving average shows that funds are not stepping all over each other in a bid to buy stocks. The trend of lower volume rallies continues.

Breadth was slightly negative on the NYSE, with decliners beating advancers by a 16.7-to-16.1 margin. Advancers beat decliners, on the Nasdaq, by a 4-to-3 margin. New highs came in at 302 compared to 55 new lows. The problem with this figure is the negative divergence in new highs compared to where they were when we were at this point before Feb 27. The new highs now, with us near the old highs, is much lower. And the new lows are much higher than where they were when we were at this point before the Feb 27 sell-off.

Today’s reversal, like I said earlier, was very bullish in the short-term. However, when we step back and look at things overall, it still looks like buyers are just looking to bargain-hunt here and/or shorts are covering because their stocks are going against them or are not falling lower. This intraday reversal today was very similar to the ones seen after the March 14 lows. They even look the same, with the low volume. The market may be near the highs but with the low volume rallies after the large volume sell-offs, this continues to look like a short-squeeze rally from a very oversold market.

The extreme negativity after the February sell-off appears to be cooling somewhat, after the month of gains we have seen. The put/call ratio which has been near the moon has finally come in some, closing today at .89. This shows that all the fear that was in this market very quickly is starting to make its way back out. The higher price gains after this dip has convinced many small retail players that every bounce has to be bought.

I believe this is the last bounce before a failure. Could I be wrong? Damn straight. But if I am wrong, do you think I will not be buying even more stocks that break out of HOT pretty green charts? Exactly. But where were all of these part-time players in 2003, 2004, or 2005? They only started to show up in 2006. Since the dumb-money is getting so adamant that stocks have to rise, we are probably not looking at a lot of big gains in the intermediate time frame.

If you don’t believe me that something is wrong with this rally, why don’t you take a look at the top two indexes this year: the DJ Utility index and the Medical/Healthcare index. The DJ Utility group is up 10% this year, well outpacing the other averages. The IBD Medical/Healthcare index is the second best index YTD, with a 9% gain. Therefore, it is clear to see that the defensive stocks are leading this market. This could be a foreteller of bad things to come in the market, as defensive issues are not what the best bull markets enjoy as top stocks.

And just take a look at the top stocks today. They came from the OLD leaders. Oil & Gas-Int had 50% of its IBD industry components hit new 52-week highs, and tons of Metal groups made 1% gains or more. Some old leaders are getting hit. The Transportation stocks got hit across the board today and the Housing index fell 1.1% leading the indexes to the downside.

The old leaders and defensive stocks do not mix-up to make a great bull market. Therefore, I find it hard to believe that we can continue to rally with these as leaders. However, as long as the trend is up, like it is now, that is where I will be. Still, however, without a lot of fresh breakouts from long clean bases it is just too hard for me to be like everyone else and embrace higher gains. There are too many flaws in individual charts to think otherwise. There are also NO new fresh leadership showing up. Normally, during a NORMAL pullback, you get some industry groups climbing the list with many stocks setting up ready to breakout from HOT patterns. Where are they?

There are some nice stocks breaking out. But most of these breakouts still have some flaws in them. Nothing is perfect. Normally, when a fresh bull starts, you will have perfect charts out there like TESOF. Yes, TESOF, is one. But normally you have MANY MANY others with the same chart pattern acting the same way. If you have been following my longs, you will know that I am doing VERY VERY WELL since February 27. However, almost all of these have had something or another slightly wrong with them. This simply does not happen in a market that is about ready to run to new highs.

There are still a lot of problems out there that DID NOT exist during the past four plus years. Margin debt for purchasing stocks is at all-time highs (over the March 2000 top levels), the housing market bubble is popping, the subprime market has gone into meltdown with its effects spilling over into the economy, inflation is still rising despite a slowing economy, GDP numbers are being revised down (they were being revised up every quarter until the most recent quarter), and the consumer’s wallets are tightening up as you can see retail sales finally starting to plummet. This is all part of the reason, along with my charts, why I remain VERY doubtful that any meaningful run can happen. Even if we do get a run, you must understand, this low VIX guarantees you will NOT MAKE A KILLING OR GET FILTHY RICH. So for those of you who want this market to keep going up, you are insanely NUTS!! We need a big pullback before we can EVER think of hitting 500% gainers in six months or less on a consistent safe basis.

The bulls are still in complete control but unless a ton of volume starts hitting this market on the upside I have to wonder how much longer this can last. Remember, during the 2006 bottom, I was one of a very few market analyst that said to buy stocks and that the market was going higher. This time the market is going higher, but unlike last time I don’t trust this rally AT ALL. The last rally SUCKED, don’t get me wrong. But this one is 100x worse. I still expect heavier volume selling to return, when the retail bulls are done with their bargain-hunting. The catalyst for that is earnings season. That starts unofficially on April 10 when AA reports. Numbers are already low but if they come in lower than expected already you could argue that might be the straw that breaks the camels back.

But until that back is broken, we must keep buying the few HOT green charts that do setup. So I will stick with the current game plan but keep my guard up. It was a very slow day today and I hope it is more exciting tomorrow and the rest of the week. Days like today are hard to sit through.

Aloha and I will see you in the chat room.

At the close, the SP 600 was the daily winner with a .4% gain, the NYSE followed with a .3% gain, the DJIA gained .2% finishing higher for the fifth straight day, the SP 500 finished .1% higher, and the Nasdaq bucked the trend falling .1%. Leading stocks did not do anything special today, with the IBD 100 gaining only .1%. The lack of ability to keep up with the top performing indexes is a subtle sign of weakness and may indicate that the rally is running out of steam, already, in the short-term. It is still too early to conclude for a fact that is what we have happening here.

Volume was much lower on both the NYSE and the Nasdaq. Volume was running about even with yesterday’s total. But around 1pm EST, traders took off early, starting the weekend early. The lower volume is just what you see after such strong gains on Wednesday. The volume on the NYSE was the lowest total since late February, showing that big funds were not interested in buying or selling stocks here. Breadth was positive on both exchanges, with advancers beating decliners by a 9-to-7 margin on the NYSE and by an 8-to-7 margin on the Nasdaq. New highs continue to trounce new lows, by 301-31. This action shows that despite the big boys being absent, breadth is still strong and there are many stocks still making gains, despite the low volume rally after the Feb 27 selling.

The biggest gains are mainly coming from the old leaders in the Oil & Gas industry. These stocks continue to dominate the new highs list and continue to work there way back to the top of the industry group tables in IBD. Part of this is due to the fact that oil has stopped moving down. Today, oil rallied to over $62 a barrel, closing at $62.28. The gains in crude oil were given credit to the Iranians capturing the 15 British soldiers.

Overall, it was a great week, for the major market indexes. All of them produced significant gains, helping traders quickly forget about the pain from February 27. For the week, the SP 600 led the way with a 4.1% gain, the NYSE followed with a 4% gain, the SP 400 came in with a 3.9% gain, the SP 500 rallied 3.5%, the Nasdaq gained 3.2%, and the DJIA came in with a 3.1% gain. It was a very good week, for investors who wanted the market to recapture the losses. In fact it was the best week for stocks in six months.

I do have to admit that this market is holding up very well, considering the amount of quick damage off the February highs. My new buys are doing very well, since then. Most are going up and there have been very few that have not gone up and have reversed. In fact, I can not think of any complete sells out of any new buys the past month. Every long I have taken is up. The only problem is none of these longs are breaking out of sound long-term bases. And the ones that are breaking out of long bases are not Featured quality stocks. The Featured quality stocks are breaking out of shorter bases and/or are bouncing off key moving average lines indicating that it is only a resumption of an advance and not part of a fresh new bull market.

The volume on the way up is also well below the volume figures on the sell-off last month. This rally still looks like an oversold bounce off a very pessimistic tape. That bounce has simply come too soon. We have not done enough damage on the downside and we have not based long enough to get a real correction that could set us up for a powerful new bull market. Without this long correction, you do not have enough time go by for a change in leadership to develop. The new leadership usually comes out of longer drawn-out corrections. Not from quick collapses followed by a lower volume bounce. You simply can not create enough momentum to the upside without creating nice long green bases. And you can’t create those bases without the market taking a breather for more than a couple of weeks.

Instead this uptrend appears to just be a continuation of the longer bull market that started in October 2002. However, like I have been saying, this pullback is and was much different than the rest, with many charts breaking down on heavy volume. However, not all charts did break down. By not panicking and using sound discipline, I was still long 170 stocks in clear uptrends. The fact that so many stocks remained in uptrends, after the sell-off, was the tip-off that this breakdown was not necessarily going to lead to a crash. By doing that, I am still long many stocks that have now made strong gains while the market recovers. And by having cash ready for the new buys, I was able to move dead money into stocks that have turned out very well. Therefore, my account, is much higher than where it was the day after the sell-off.

So, there are some signs that this rally might work out for a while. However, the rally off the April 2000 lows lasted until August 2000, after a significant sell-off. How did that work out for the perma-bulls? But before I start getting all bullish again I am going to have to see more hot stocks with hot fundamentals break out of round, sound, and green bases. I don’t know how I am going to get these this far into a bull market with VIX this ridiculously low. But that is what I am looking for. However, without a big sell-off that causes a jump in the VIX, it sure is going to be hard to find these beautiful long bases.

So, without this pullback, the gains that we will get will not be the variety that produces many 100%-500% winners in six months. Instead you are going to have to be happy with all the 20%-150% gainers that I find. With the VIX and fear this low, it is impossible to get any real movement in stocks; impossible! This market is best for paying the bills and maybe putting a little bit of money away. This market is not for those of us who are looking to become wealthy and make a killing. Markets like 1999 and 2003 had so much fear in them when they launched there bull markets that making a killing and getting rich was not a problem. Right now, if you are looking to get rich, you have a problem: it is called the stock market.

Since this is not the market to be making a mint in, it must also be said that the most important play right now is to keep cash on hand. Without massive gains in the indexes on huge volume with tons of Featured stocks breaking out, you can be sure that the odds are high for this rally to fail. So since the indexes are not perfect, there is no reason to go all-in on margin here (200% long). And there will not be a time to go all-in, until you start seeing this action. Normally, like I keep saying, to burn the point in, you need a long drawn-out correction. That creates the proper environment that launch great bull markets.

The one important thing to remember here, also, is to not chase stocks. If you sold all of your longs, when you panicked after the Feb 27th selloff, you should step back and think about the situation. How often and how many times do you have to hear that it is never smart to panic? Then why do you still do it? I know many traders who did the right thing and sold stocks breaking down, after the Feb sell-off. However, those same traders I know dumped stocks that were still going up or consolidating. Why? Why would you sell a stock if it is going up? Especially if it was going up before the sell-off and DURING THE sell-off. If your stock rose before the sell-off and after the sell-off, yet you sold, you must recognize that you are still trading very scared and NO great investor or trader has ever become a great investor or trader by trading scared. That is a sign of personal weakness. Something I am not familiar with at all.

If you are still sitting in cash, that is great! Stay patient and wait for those HOT charts with HOT fundamentals. Then, if everything is perfect and the market is right, go all-in. You can make everything back and more that you might have lost if you tried to buy stocks now based on the fact that you messed up and sold them when you were not supposed to sell them. There is always a bull market somewhere, and even if there is not, there will be one soon somewhere.

We can even take a personal lesson by me during the recent selloff: ROCM. I sold that stock after a nasty breakdown below key support on 3/5. This breakdown came after what appeared to be, in hindsight, an early February top. Thankfully, I took 20% off there. But after the Feb selling, the stock held up well so I remained long. Then, however, going with the trend of the market, ROCM fell. And fell hard on heavier volume. After 3/5, it clearly looked like ROCM had topped with the market. But that turned out to be the low. Since then the stock has gone straight up and my 9% gain that I took on 3/5 is now a 75% gain. Do I feel stupid? Yes. But did I follow my rules? Yes. So, therefore, I do not feel like I made a severe mistake.

What if ROCM did not break the February lows and would have held the 50 dma? Would I still be long? OF COURSE! YES! If that is the case no profit taking rules would have been hit and I would be sitting pretty in ROCM with a 75% gain on my remaining position. Instead I stand alone. No big deal.

Folks, we are very late in this rally. There is clear economic slowing out there in the subprime, home, jobs, and manufacturing markets. There are more breakdowns on heavy volume with low volume rallies in individual stocks than I have seen since 2002. And everywhere I turn people are asking me about stocks because they have just recently purchased stocks, after selling their real estate holdings or getting out of real estate. They believe every dip should be bought and who is to blame them? CNBC keeps telling them that they should buy this dip as this is just a normal correction. If it is so normal, why are so many charts ugly this time. If it is so normal, why are all the talking heads on CNBC telling everyone to buy. They don’t do that at market bottoms. They only do that at or near market tops. After four years of gains without a 10% correction in the DJIA, I would err on the side of caution and still conclude that there is more risk to the downside here than the upside. If we were down for four straight years, do you think I would be saying the same thing? Of course not. This is history. And history tells us there shouldn’t be much more to go.

We shall see how correct history is. Aloha and I will see you in the chat room. Have a great weekend!!!

At the close, the SP 600 led the way with a .8% gain, retaking its 50 day moving average. The NYSE rallied .7%, the SP 500 and Nasdaq each gained .6%, and the DJIA gained .5%. The IBD 100 led again, for the second straight day in a row, with a .8% gain. That is two days now that the index has been on pace or kept ahead of the market. NYSE volume was slightly lower and the volume on the Nasdaq was lower by 4%, indicating that big institutional firms still have no interest in snapping up large amounts of shares here. Advancers beat decliners by a 5-to-2 margin on the NYSE and by a 2-to-1 margin on the Nasdaq. New highs beat new lows by 211 to 68. The breadth and new highs show that there still appears to be more upside left in this dead cat, high put/call (1.1) ratio bounce.

I am still only calling this a bounce, because I am not seeing ANY new stocks appear on my scans with green beautiful charts. And I am not seeing any accumulation what-so-ever on the indexes. We are going into day six of the rally attempt. If we do not get a 1.7% gain on heavier volume tomorrow or on day seven, the chances of us getting a rally that will produce anything special is greatly reduced. Remember how long it took the rally off the July/August lows to get started last year? It was well over 10 days. That launched one of the weakest rallies I have EVER been a part of. Only 180 stocks made 100% gains or more during that advance. That is stunningly pathetic. The longer we wait on the follow-through, the less of a chance we have of having a great rally. I am not looking for a follow-through to happen and even if we get one I expect it to fail shortly after. We really have a LOT/TON of work to do to fix the mess that the February 27th sell-off created.

However, there are a TON of impatient traders out there that have learned NOTHING from history’s greatest traders. Livermore, Loeb, O’Neil, Baruch all knew how important it was to sit on cash and not invest when the odds were not in your favor. How do you know when the odds are not in your favor? When the indexes are not in a serious uptrend or downtrend. When they are going back and forth like this it has always been the cash play that has been the smart play. The impatient and history ignorant traders that are swinging for the fences in this market are going to eventually be served a very painful reminder on why it is not smart to make overly bullish or bearish bets in a market that is confusing like this one is. These traders will NEVER learn and it is probably for the better as they ensure an even more liquid market for trend traders to enter.

If you feel like you are missing out on the action, then trade with a little bit of your money. Just don’t make any stupid bearish or bullish bets with all your cash in this market. There is for sure to be more wild price action in the coming weeks, depending on what the FOMC has to say. That meeting wraps up tomorrow at its usual 2:15EST. Nothing new is expected to come out and the Fed is expected to hold rates steady at 5.25% for the sixth straight time. The wording in the statement is what all commentators will be focusing on. It seems that a slowing economy and inflation is what is occurring now in our markets. If that is the case I sure wouldn’t be looking for the Fed to be cutting rates anytime soon.

Tomorrow the fireworks will all be over the Fed. However, we are setting up for a positive open tomorrow, on the back of good earnings reports from ORCL and ADBE. This positive open is sure to cause the early shorts more pain. Everyone was asking me three weeks ago why I wasn’t shorting everywhere. Well the past two days of gains is one of the reason. The other reason is simply history. The best time to short stocks is FIVE TO SEVEN MONTHS AFTER THEY HAVE TOPPED. Being too early has cost many great traders many profits. I am not one of these traders who will lose my profits by trying to be a hero. I don’t want the top and the bottom. I want the big meaty middle; the filet-mignon, if you will.

Before I wrap it up for the night and go out to see the movie “300,” I want to bring to your attention one key stat I saw today: The Singular Research group offered a report today stating that margin debt is at a new all-time record of $296 million in February. This is considered a contrarian indicator and signals that the crowd overall is very bullish buying stocks on margin. Do you know when the last all-time high was? It was in March of 2000. The month that the meltdown in tech and internet stocks started. Take it for what it is but this report has not seen those numbers since the last IMPORTANT top in the stock market. The current short interest on the NYSE is very low and the amount of share buybacks are still very bullish overall for the market but the crowd is going out on a limb buying stocks and in the long-term that could be very negative. On the short-term though it is hard to argue with all the share buybacks.

Which side is right? We don’t know yet. CASH IS KING!!! right now. Until we get a clear trend and truly know which side is the right side, I will continue to play the beautiful longs that setup and the ugly shorts that setup. There isn’t a lot on either side, which tells me we still have more time to tire and frustrate the weak traders and investors, in this market. I hope you had a great day. I had a TON of errands to run and had to help out a vehicle-less friend all day so I apologize for the lack of showing up in the chat room today.

Aloha and I will see you in the chat room tomorrow. Remember, CASH IS KING!!!

At the close, the SP 400 led to the downside with a .55% loss, the DJIA, SP 500 and SP 600 closed .4% lower, the Nasdaq fell .3%, and the NYSE held up the best only falling .2%. The IBD 100 fell .6%, leading all the indexes lower. There is really nothing to read of that, however, as this was just that kind of day where you really can not draw any conclusions about underlying weakness or strength amongst the indexes.

Volume was higher on the NYSE by about 35% and higher on the Nasdaq by 20%. Breadth was negative on the NYSE, with decliners over advancers by a 5-to-3 margin. On the Nasdaq, losers beat winners by a 3-to-2 margin. New highs beat new lows by a 114 to 96. But the Nasdaq still has more lows to new highs; 64 new lows – 34 new highs.

All of the increase in the volume can be directed completely to the quadruple-witching action. The higher volume, with the price declines over .2% would normally be a clear distribution day. That would send a warning signal up that this rally has a much higher chance of failing. But I find it hard to draw conclusions on days like today so I will continue to watch for further selling on much heavier volume.

Don’t forget, right now, we are now looking for a follow-through day within the next seven days (ten is OK too) of a gain of 1.7% on higher volume. To be honest, I wouldn’t be looking too hard for this to happen. I am pretty sure….like by 100%….that there would be a ton of more stocks setting up in beautiful green sound chart patterns in sectors moving up the list. Guess what? That is not happening.

For the week, the DJIA led to the downside with a 1.4% haircut, the NYSE fell 1.2%, the SP 500 fell 1.1%, and the Nasdaq and SP 600 held up well only losing .6%. The IBD 100 managed to not swoon either, only falling .8%, in what was a wild and confusing week overall for the majority of market players. To me, the week, can be wrapped up in one word: failure. A failure for the market to produce a follow-through and a failure on the markets part to show me that it really wants to resume its four year bull market.

All the talk this week was of the subprime market. And who can blame everyone? The fact that stocks like AHM NDE NEW LEND and many many other stocks with subprime problems got killed is just stunning. But what I find more stunning is the action in LEND. That must of have been a daytraders dream (too bad that is all it normally is for that sub-group) as the stock fell 80% in seven days and then rallied 170% the next three days. Obviously, the intraday players, did not nail all these gains. But the few smart swift traders out there that were able to play these moves correctly made a mint. And when I mean a few, I mean a few. I monitor over 30 chat rooms and I saw the majority of the trades. They were not winning trades. I am still stunned that newbies try to play this stuff without the basic rudimentary knowledge of this stupid game.

The only good part about all of this is the fact that TA worked well, once again, in saving your behind from huge losses. The only way not to lose 99% (like in NEW) is to cut your losses short. Cutting a loss with a 5% to 10% loss is the ONLY insurance you have against stocks like NEW AHM NDE and the bunch. The even more wonderful ability of TA comes in the form of Homebuilding stocks. These stocks topped last year at the beginning of 2006 and ALL rolled over on heavy volume during the summer of 2006. Now we have all this horrible news in the homebuilding market with the DHI CEO going so far as to say his business is going to “suck.” TA, you are the greatest thing EVER for the individual investor in the stock market; thank you (yes that was rhetorical and a bit nutty).

The trend is still in place, after this week. The pattern of higher volume sell-offs and lower volume rallies continued this week and that pattern has created a very negative picture. To look at it this way, just think, the Nasdaq is the only index with a Acc/Dist rating of D+ or better, with a C-. All other indexes are in the D range. Real strong powerful market bottoms do not occur when this grade is a D in so many indexes. It appears more time is still needed before anything exciting is to happen. This market is still ugly.

The ugliness comes in the form of all the red on my charts, the nasty acc/dist patterns in the index and stocks, the few new longs that appear on my scan, the NO new Featured longs on my scans, the increase in shorts in my short scan, the nasty breakdowns in all of the old leaders, and the fact that one of the top two indexes the past three months has been the US Defense index. This is the best chart out there and it has gained 4.81% the past three months. This leadership shows that the market is in clear defensive mode and that this is not the time to be looking to go 200% all-in.

But I must say the possibility that a bottom could occur still exist. I am still long around 170 stocks and even though I am not finding much new that often there are still gems out there like FALC and TESOF that are as pretty as can be. I would think that if this market was about ready to really breakdown and crash that I would not still be long 170 stocks. The number would be under 100. Maybe the number will fall under 100 soon. But for now the fact that I am long 170 stocks means that I am long 170 stocks in clear uptrends that have NOT violated my complete cut loss or complete profit taking rules. So we must be ready for anything. However, I am leaning heavily, very heavily, for lower prices. I expect to be selling off more longs in the near term. But if we rally, I will be ready to make more money.

Especially with the FOMC meeting coming up. I am sure this will be market moving news, as it typically is, but everyone is pretty much for sure that rates will be left the same at 5.25%. The one fact I am sure of is that we will not see the Fed lower rates. The inflation number and worries are still too prevalent in this market for them to be taking such action. The CPI is still growing too fast for the Fed to make that decision. But hopefully, after Wednesday, we can get a better trend going and actually get some real follow-through to the downside or upside. The choppy action is not the best market for me to make money in.

The most important thing to remember, this weekend, when you are getting wasted, is that ALL bear and consolidating markets eventually turn into bull markets. Even in severe bear markets, there will be many rallies of 10-20% on the indexes where you can get some handful of stocks that produce 50%-100% gains. This is because the VIX will be up and every downtrend always overshoots itself.

Patience and hard work = success. Patience and a little bit of hand sitting in this market = success. Trust me, the majority of people will flip and burn their account here. The best and most sound advice right now is to be cash heavy. CASH IS KING!!!

Aloha, enjoy your St. Patrick’s Day, and I will see you in the chat room.

When the wild day was over, the Nasdaq reversed from a .8% loss to close higher by .9%, the SP 600 finished .8% higher, the SP 500 gained .7%, the DJIA rose .5%, and the SP 400 and NYSE rallied .4%. Leaders managed to keep pace with the broad market as the IBD 100 and IBD 85-85 both rallied .7%. That is better than lagging.

Volume was a tad higher by about 5% on both indexes. That would appear to be positive on such a reversal day but there is a key number that should be paid attention to. The run-rate on volume while the market was selling off was about 10-15% higher on the NYSE and the Nasdaq. After the reversal off the intraday lows, volume died down, and as mentioned above only finished 3-5% higher. That shows that today’s selling was more intense than today’s buying. That low volume on the rally, along with the fact that the price gains didn’t even come close to covering the losses from the previous day should continue to leave investors agnostic on this market. For a real bottom, normally volume to the upside explodes after low dull selling.

More key statistics that make me believe this wasn’t a real bottom include the fact that breadth, on such a strong up day, was not more positive on the Nassy and NYSE. Advancers beat decliners on the NYSE by only an 8-to-7 margin. On the Nasdaq it was 10-to-7 positive. A bit better, but considering the gains after the losses, not good. The other statistic that was quite telling was the new highs to new lows. There were 63 new highs (17 of those were closed-end funds) to 268 new lows. I don’t have the statistics anymore on the key lows since 1996 but I am sure the amount of new highs to new lows were no where this far off at key important large-rally producing bottoms. If this was a bottom today (which I do not think it is), those statistics would be much closer as new leaders would have worked there way to the top by now. There are no new leaders.

However, it would not surprise me at all anymore if the dead-cat bounce does not continue for a couple of more weeks. The put/call ratio after spiking down to .66 is back up to 1.47. That is amazing! This indicates there is too much fear out there and that more people are betting on the market going lower than moving higher. Most of the time this crowd is wrong, so this is something we have to watch. The other new finding today was from the Investors Intelligence survey. That came out with bulls falling to 45.5%. That is the lowest since September 1. Bears climbed to 28.9%. They have not crossed yet so looking for a bottom from these numbers is not there yet. However, with bulls dropping so much, it seems that less people “believe” in higher prices here. But if you look at the dumb money via a new CNBC poll, you will see that only 6%!!! think the stock market will be lower a year from now. This could help keep the markets in a sideways holding pattern for a while as more people are convinced this is a real bottom. Remember, all of these surveys and indicators are all secondary to the price and volume action. To be honest, that is all that really matters.

Another area that caught my attention today was the fact that the leading industries today were, once again, all the old leaders/new laggards. Steel, Homebuilders, Finance, and Investment Banks were the winners today. Too bad they have been real losers recently and one day of gains does not a new trend make for these ugly stocks. Until new stocks climb the ranks of leadership, I can not be convinced this is a bottom. It doesn’t feel or look like a real bottom. Especially with laggards leading.

I guess I should not have been surprised by the rally today (trust me, I am not), considering that it was clearly obvious that after such a failure yesterday that there “had” to be more selling. Those kind of thoughts are borderline evil for my accounts. However, my overall thesis of this being a dead-cat bounce remains and my shorts are still on. I just have to remind myself that every time I am sure that more selling has to follow-through immediately, I need to step back and consider a bounce possibility. Thank you Mr. Market for humbling me, once again. I am sure you will do that again soon. The obvious play is not always the obvious play. Sometimes the obvious play, for me, takes a little while to work itself out.

Could this be the real bottom? Yes, but I truly doubt it. If you will please read my post on Tuesday of the first sell-off and yesterday’s post, you will see all the reasons why I feel this rally will not hold and why we have topped. But, remember, my opinions are just as good as everyone else, when it comes to the stock market. The market does not care or listen or follow my opinions or anyone else. What really matters is the price and volume of the market. Since we undercut the lows on the DJIA yesterday, undercut the lows of the Nassy today, and had a clear distribution day yesterday, the rally attempt from March 5 is over.

However, the fact that we finished up today on an increase in volume now makes this rally day attempt number one. Remember, we can have no distribution days and we can not undercut today’s lows. If we do not do that, we will be looking for a 1.7% move on higher volume on day four to seven (or 10) to signal a follow-through day. This tells us that it is safe to start buying longs again. However, it doesn’t guarantee a bottom. And since we were not even up 1% today and volume was barely above yesterday’s total I have a tough time believing that this will hold.

So then how long will this rally last? I don’t know that and neither does anyone else. If you think they do, you are fooling yourself. It is so ugly out there and I have so many ugly charts that I don’t think it can last long. But if pretty charts start showing up left and right, trust me, I will be the first one to turn myself around and start going long those pretty charts. Just like I do at every other market bottom. Trust me, I have no solid opinions in the market. My opinion will change one day to the next if the market tells me to do so. So far it is still telling me to be calm and stay on the sidelines. It is also telling me it is safe to throw out some test shorts. If they don’t work, no problem. Simply cut your losses and wait for the market to give you another signal.

If you have taken my advice and been daytrading the solar stocks, you have been doing very well, despite the selling. The sad thing today, for me, was ASTI. I flagged that stock two days ago as a long. I passed on it because BOP fell while the stock rose. If BOP would have stayed max green, there is no doubt, I would have gone long this stock. But I passed and missed an overnight 89% gain. I hate looking at it (not really because it is so beautiful) knowing that I passed it on 3/12. However, the stocks recent action is much more wild than what it previously was and BOP did diverge lower so this stock could have just as easily have become a DTPI. Did you see that stock? From a pretty chart to a destroyed chart overnight. Three months of gains gone in one day. So because I followed my rules and did not take a position in a risky market, I have to be ok with that, even though the stock was up 89%.

I am going to cover 25% of all my shorts that did not close red today. It appears it is not the right time. Remember, if this is a real top, the leaders will have their real breakdowns and biggest price plunges FIVE TO SEVEN MONTHS AFTER they top. It still doesn’t feel like it is a right time to be too bearish here but nor does it feel right to be on the sidelines and not testing the short waters. However, for now, I am keeping my shorts small and on a tight leash.

Cash is still king!!!!!!!!!!!!!!!!!!!!!! Aloha and I will see you in the chat room.

At the close, the SP 600 led the way to the downside with a 2.3% loss, the Nasdaq followed with a 2.2% loss, and the DJIA, NYSE, and SP 500 all finished 2% lower. The SP 500 now has an Accumulation/Distribution rating of E. The worse news behind the numbers is the fact that all these indexes managed to close at or near their LOD. That tells me that the selling is not done and that funds couldn’t sell stocks fast enough. The IBD 100 lost 2.6%, leading the overall market. But the losses could have been much worse. Some of the reasons the losses were not worse was that after the selloff from two weeks ago many bad stocks have been replaced by more defensive issues. If the IBD 100 still would have had the same components as two weeks ago on Tuesday, it would have been much uglier.

Volume was much higher on the NYSE and the Nasdaq. Volume rose by 33% or slightly more on both exchanges. The selling today was well above the 50 day volume average and was higher than ANY day of the attempted rally from March 5. Breadth was negative on both exchanges by a near 4-to-1 or 9-to-2 margin. There were a 114 new highs to 206 new lows and the Nasdaq only produced seven of those new highs. The new high list is dominated by weak miscellaneous closed end funds. If you take out those stocks, the breadth of new highs to new lows is a much worse 92 to 206. The most telling tale of the market is in the IBD industry groups. Just like on the Tuesday that this all started, only 1 out of 197 groups were higher. It was a VERY UGLY day.

The biggest losers today were again the Building-Resident/Comm group and the Finance-Mortg & Rel group. Both lost a tad over 5% each, as every stock in both sector continue to get CRUSHED. If you read my post yesterday you saw my writing on the homebuilder group. As you saw today, they all continued their blowups. It didn’t take a crystal ball to tell they were going to fall further. All you needed was a book on TA. The most intriguing hunt on my part was trying to find the next AHM LEND and NEWC. I believe CCRT and ACF are the next two stocks to really get taken to the woodshed. If you are a gold member, you can see a list of ALL the ugly stocks ready to crash in the shorts section.

The other clear trend that emerged for me today, that solidifies my views that this market is finished, was the fact that I saw the old leaders that were the big winners from the March 2003 bull market get taken out for a beating. Whether it was the Gold group, Oil, Steel, Metals, Investment Banks, or Airlines, they all are getting hit and many of the top gainers (like TS GG GDP LEH ZNH) are clearly rolling over, topping, or straight up breaking down from long-term support. The old leaders are now dead. To me this clearly signals that the rally from 2003 is over.

And speaking of rallies being over, the sell-off today signals to me that the rall attempt from the March 5th lows is over. The rally is dead! I don’t care that we have not broken through the old lows yet. The fact that we failed right at the 50 dma on HUGE trade, compared to the rally, proves that the market is done. The leaders breaking down only confirms it.

Classic TA worked this time. The big sell-off, followed by a low volume rally to the 50 dma, that then led to another sell-off is TA 101 on how a bearish market should act. Everyone was looking for the sell-off which then led to everyone trying to outstmart the TA playbook by expecting it to fail. That led to the actual failure. You have to love the psychology of the stock market. I am not tooting my horn but this is yet another top that I have nailed by simply following TA 101.

And, btw, it wasn’t me that nailed it really; it was the market. The market quit giving me high quality Featured stocks in January, then only gave me speculative longs until late February, that then led to the one big sell-off two weeks ago today. By following the actual market price and volume, and not the talking heads on CNBC or in the Wall Street Journal, it has now paid off. And paid off even more in the amount of money saved not staying long stocks that are in clear downtrends. I know many people that are becoming bagholders and are even buying this dip. That is pure gambling.

Like IBD said today, for the market to right itself, it will probably take many weeks to three months before we can repair this SEVERE damage. The blowups in the subprime, homebuilding, and soon investment banking stocks is so severe that the TA damage is so ugly that it will take months and not weeks to fix. My charts are now gone. In both my longs scans I found nothing and only found a handful that had pretty charts. I have not seen this kind of damage to individual stocks that have left such ugly chart patterns and so little pretty charts since March 2000. If you are still long, that little bit of personal experience and observation should have you a bit worried. This is not the time to try to make money. This is the time to keep it.

I simply see NOTHING positive out there. Nothing. I can not think of any great looking chart or any economic number that I see that makes me think the market can rally off of. Maybe that in itself is a contrarian positive but with the put/call falling to .66 yesterday it seemed the crowd got pretty bullish in a short time. However, the put/call spiked up to 1.46 today; so the fear is back. The VIX had a nice spike which is always good to see. I would love to see the market really tank and the VIX go to 30. That ensure that the next bull market will produce many 100-500% winners for us in a six to twelve month time frame.

I have been saying since the selloff two weeks ago on Tuesday that cash is king. Well CASH IS KING STILL!!!!!!!!!!! But if you are royalty and you know how to make money on the long side and your account balances shows YOU that YOU are a good investor on the long side, you might want to consider going short now. This is the time to start shorting. If we bottom and reverse, cut your losses. However, in a historical standpoint, the trend is now down on all time frames. The damage to the charts shows that more downside is probably in store. With so much damage and so few retail investors giving up yet, we are set up for more selling.

Folks, there is some serious damage out there. I mean damage like I have not seen since March 2000. Either we bottom here or the subprime loan debacle is going to open up a major bear market. I would lean on the bearish side. I am going short nine stocks (if I can get filled) in the morning. I am now shorting. Does that mean I quit going long stocks? No. There is always a bull market somewhere. But I don’t settle for second best. Unless my charts are all green and in a perfect smooth pattern, I will not go long. I have bought stocks the past two weeks and I still will if the proper pattern sets up. But right now, I can see the big money is to be made on the short side now. 3 out of 4 stocks follow the general market trend. That trend is down.

Aloha and I will see you in the chat room.

At the close, the SP 600 led the way with a .4% gain, the SP 400 followed recapturing its 50 dma with a .35% gain, the NYSE picked up .2%, the SP 500 was higher by .1%, and the Nasdaq diverged to the downside with a very tiny .01% loss. The IBD 100 failed to lead to the upside, with a .3% gain. This index should be outpacing all the indexes by a fair margin on rallies. The fact that it is not is not bullish for this bounce. The top sector on the day was the Computer Software-Security group (VDSI, BCSI, DMRC, SFNT, MFE, DBTK) with a 6.6% gain.

Volume was lower on the NYSE and higher on the Nasdaq (IBD says volume was lower on the Nassy). The lower volume with the gains, on the NYSE, show that institutions have no interest in buying a market that just went through such a severe selloff; at least they don’t yet. The volume on the Nasdaq really doesn’t matter if it was higher or lower. The small price changes basically leave this day as a draw for both bulls and bears.

Breadth was slightly positive on both exchanges. Advancers beat decliners by a 3-to-2 margin on the NYSE and by a 8-to-7 margin on the Nasdaq. However, a small sign of weakness can be found in the breadth of the DJIA. There were 14 advancers to 16 decliners. Maybe I am reading too much into it for a such a weak day but negative breadth with price gains are not normally bullish in the short-term. There were also 114 new highs to 80 new lows. If the market was in better shape, I would expect the difference to have been wider.

Friday was day four of the rally attempt. The best rallies almost all start on the fourth or fifth day and when they rally they make HUGE point gains on big volume. The fact that we did not get a follow-through today doesn’t mean we still can’t get one in the next six to nine days. But the fact that this one did not start early increases the odds of it either being a weaker rally if we get one or that we are setting up for more distribution. Even if we get a follow-through nothing says that it will succeed. All market rallies start with a follow-through day. But not all follow-through days guarantee a bull market. I think no matter what happens, the way the charts look, this rally either will not happen or it will fail.

I say this because I don’t have nice charts out there. I always have nice and pretty charts setting up with good fundamentals and with poor fundamentals, before a real rally takes hold. Without these charts, there is no reason for a rally to appear. Also the Accumulation/Distribution ratings on the index charts are horrible. During the rally this week, the grades fell! You don’t get that at real market bottoms. When the March 2003 rally got underway, the Acc/Dis ratings were a B+ or better on all indexes. Right now, there is a D- out there on the IBD 100 and the SP 500. The NYSE also carries a D and the Nasdaq has a C. This shows that there is still heavy selling by funds. Until the funds start buying stocks, these grades will stay low. So until the market gets some better figures, don’t count on any rally really succeeding and producing big gains. History shows that to be the case; not my personal opinions.

For the week, the DJIA and SP 600 led the way with 1.3% gains, the SP 400 and 500 rose 1.1%, and the Nasdaq gained .8% this week. This seems good after a selloff but remember the Nasdaq lost 5.9% last week. A gain of less than 1% after a 6% loss is not what I would call healthy. The IBD 100 gained 2.5% for the week, well outpacing the other indexes. But just like its Nassy brother, the 2.5% gain pales in comparison to the 9% swoon of last week. It is hard to call this weeks rally anything but an oversold dead-cat bounce. There is simply no other way for me to interpret this action. If this was a real buying opportunity, more charts would appear and volume would be much higher on the indexes. Where are the big boys? They are possibly waiting to sell at higher prices waiting for the dead-cat bounce to end.

It was a crazy week that started with a big selloff and ended with a continuation of a dead-cat bounce. The low volume gains after such a nasty week did nothing to change my opinon on this market. The current market condition I have been writing about since last Tuesday’s selloff is still in place. It doesn’t matter if the subprime mortgage loans or yen carry trade was the reason for the selling. God knows most ignorant journalist seemed to place blame on these two catalyst. What matters is the fact that this market sold off hard last week, rallied on poor volume this week, and didn’t produce squat for charts that signals to me it was a one-time selling event last week. The only real good news I can see is that oil fell back to $60 a barrel. But the stupid commodity has not fallen below that since February so I am not that stoked over that bit of data either.

This market is still not the kind of market I like to operate in. I am still taking longs whenever I can find a pretty green chart that is breaking out of a proper pattern but they are few and far between so that is naturally keeping my cash level high. As I continue to take profits and cut losses on weaker performing stocks, the cash that is raised is getting ready to be put to use in better trade opportunities. If this market rollsover on higher volume, I can start shoring all these ugly chart patterns and show you guys how to make money consistently on the short side. Or if the market rallies and charts start building green pretty bases I can have money ready to deploy into these sweet patterns. Then I can go back to making money like the good old days of normal bull markets. Remember, this last upleg from August was the weakest bull ever with only 180 stocks making 100% gains out of a universe of 8000. The norm at the start of bull markets to the first correction is around 500-1000 or more. That is where I find my handful of 200-500% winners and double fisted 100% winners. Not on rallies like we just saw. Thank God that is over!

This oversold bounce probably still has a while to go as the readings on Helene Meisler’s overbough/oversold indexes are still very oversold. That is sure to lead to continued wild and choppy intraday price action that results in poor performance from individual stocks. Daytrading is safer than holding stocks right now. This is ONLY the case in these kind of wild and choppy markets. Unitl the trend is firmly down or firmly up via a follow-through day, cash is the appropriate place for investments. When a solid trend develops, then that is where I will be. For now I am just counting my chips waiting for a good hand. 7 2 offsuit is not a good hand. And that is all I am getting right now. Fold and wait. That is the name of the game right now: waiting with cash.

Cash is king!!!! Aloha and I will see you in the chat room.

At the close, there was only one index up, like I said earlier. That was the SP 400 with a .2% gain. The rest of the market finished in the red. The Nasdaq led to the downside with a .4% loss, the SP 500 lost .3%, and the NYSE, SP 600, and DJIA all lost .1%. Not bad but the market was in the green, until a late day selloff. The IBD 100 and IBD 85-85 index were both up .1%, outperforming the broad market. However, like I stated yesterday, this outperformance to the upside is lame compared to how much it led the market to the downside.

Volume was lower across the board; which is normally what you would like to see on a pullback. However, the losses were very small and most of the day the market was in the green (minus the Nassy). So I would call this a lame day of buying that was met, on the big board, with heavier selling in the last hour. That is not constructive action after such a hard selloff. That is the second day in a row stocks have climbed most of the day to then lose those buyers and then be met by sellers.

Breadth was positive on the NYSE by a 9-to-8 margin and positive on the Nasdaq by a 3-to-2 margin. There were 95 new highs to 76 new lows. The new highs now beating the new lows indicates there could still be some more momentum to the upside. However, with the Accumulation/Distribution ratings on the Nasdaq and SP 500 a C and a D respectively, the continued rally will probably be nothing more than a continuation of an oversold short squeezing bounce.

Another negative is that the typical laggards led again today. This laggard, this time, was the Oil & Gas industry. The whole lot rose 1.5% or more in the IBD industry groups. This group saw some nice upside thanks to crude oil rallying 1.9% to $61.82. Leadership in this group and not a brand new exciting group is typical of bounces and not starts of powerful bull markets.

There is another reading that favors more upside in the short-term. The investors intelligence survey came out with bulls dropping to 46% and bears rising to 27%. That indicates there is some fear starting to show up in the newsletter writers. However, until both of these numbers actually cross and are both in the 30-40 range, a really solid bottom normally does not happen in the market. When these numbers cross, they have an uncanny ability to coincide with a market bottom.

Today was day two of an attempted rally that started yesterday. Like I said yesterday, as long as there is no distribution days and/or we don’t undercut the recent lows we have to be prepared for a follow-through. The best follow-throughs happen between day four and seven (4-10 is acceptable). So Friday will be the first possible day that can happen. As long as nothing bad happens tomorrow, it could happen. I know a lot of people are ready to short the hell out of the market. However, if you read your “How to Short Stocks” book, you will know the best time to short is months AFTER a real top has clearly been in place. We are just now starting to selloff so we are still in a very volatile and wild area where anything is possible. No true trend has been established yet.

But my charts ALL say that this is only a bounce. There is nothing really setting up in BEAUTIFUL chart patterns. On ALL previous pullbacks since October 2002, I have had TONS or at least many handfuls of nice charts with a lot of green BOP setting up for breakouts. That is NOT the case this time. I am finding a lot of shorts and those shorts are almost all producing gains immediately (ie, OMG). That tells me that shorting will probably end up being the right game in the not to distant future.

But then there are stocks like TTEC and TRCR. If you went long those two stocks the past two to six months, you have no clue that the market has just gone through a nasty selloff and many traders are confused as can be. That is the beauty of the market; there is always a bull market somewhere.

However, besides a few stocks, like these, this market does not look like the big boys are interested in it right now. The past two days simply have not had that institutional push that you normally see on real bottoms. Such small gains after such big losses is not bullish. The bulls look like they are running out of momentum but if the sellers do not take control soon we simply can not be surprised if we see this bounce last a bit longer. However, everything is setting up for a failure. I could be wrong but for some odd reason I doubt it.

Cash is king!!! Stay patient, don’t chase performance on the upside or downside, and be prepared for more volatility in the upcoming days. There is no way we are done with all the fireworks. There is sure to be more wild and choppy action before any clear trend develops. That trend looks like it will be a downtrend. But the smart play is to stand aside and stay agnostic right now.

Aloha and I will see you in the chat room.

When the closing bell rang, the SP 600 led the way higher with a 2.1% gain, the Nasdaq and the NYSE followed with 1.9% gains, the SP 400 and SP 500 finished higher by 1.6% and 1.5%, and the DJIA lagged the other indexes with a 1.3% gain. The IBD 100 led outdid the rest of the market, with a 2.9% gain. However, the relative strength of today’s gain in comparison to how much it led on the days that it led to the downside leaves much to be desired.

Even though those price gains look beyond impressive, there was something missing; volume. Volume was lower on both the NYSE and the Nasdaq. There is nothing wrong with that except normally on big up days you like to see volume much higher than on the days where stocks dropped. The lower volume indicates the big boys were not eager to buy stocks at these levels. To me it looks more like a big short squeeze jam, for now.

Breadth was very positive, on both stock exchanges, today. 196 out of 197 IBD industry groups were either higher or flat today (only the Metal Prod-Fasteners group was down). Advancers beat decliners by a near 5-to-1 ratio on the NYSE and by a 4-to-1 ratio on the Nasdaq. This, to me, seems very extreme and is not something I am used to seeing at bottoms (if this is going to become a bottom). That is just something to keep in mind. Especially considering that new lows beat new highs today, by 85 to 79. More new 52-week lows than 52-week highs, and we had 4/5-to-1 positive breadth and are less than 10% off the highs? That seems like negative divergence to me. Just another “warning flag” on this rally being possibly nothing more than an oversold rally.

The fact, also, that the top three groups were Banks-Foreign (up 4.7%), Steel-Specialty Alloy (up 4.5%), and Metal Prod-Distr (up 4.4%) show that this rally is probably not the start of the real deal based on the thesis that old leaders do not lead new bull market cycles. If this is a bottom, then we have some poor leadership of past winners that have many many charts broken and/or destroyed. The fact is the stocks in these groups ALL have UGLY charts. The whole lot of them. They are all ugly. You do not see that with new leaders in new bull markets.

Tuesday was the first day of an attempted stock market rally. We now need to see some big gains on MUCH HIGHER VOLUME within the next four to ten trading days to start feeling more safe going back in on the long side. However, a follow-through does not guarantee we are out of the woods yet. The damage to these index charts are HUGE and there are UGLY charts everywhere. These normally need weeks and weeks if not months and months to fix themselves. Also unless the follow-through is on a gain of 1.7% or more with HUGE volume, I would not be too comfortable with the gains. You also do not want to see the market undercut the recent lows before we see these gains. If the major market indexes break their recent lows by even .10, the rally attempt is dead.

The one statistic everyone is talking about (and now IBD is also) is the put/call ratio. Yes, that ratio does indicate that players are making very bearish bets. However, the total ratio now stands at 1.22 which is down from the 1.8 area before the selloff started. Still though this indicator is a big head-scratcher. If this reading was happening after a long downtrend, I would take it as very bullish. However, the high number before the selloff and a still high number now is just confusing to me. I think it may help with this short squeeze rally. However, if this market is only being held up by short sellers being squeezed, when this rally does fizzle out (if it does) it could get ugly. Bottom line: let the price and volume action of the indexes be your guide during this volatile period. Let this indicator die. I know I am going to start not talking about this indicator for a while, unless something shocking happens to it.

Do not be quick to buy this bounce. Don’t expect that this rally will fail and don’t expect this rally to succeed. If you do that and prepare for either outcome you will be way ahead of the game. Trust me, most people, simply can not do this. However, this is necessary during the current market. You simply do not know and NOBODY knows what is going to happen next. Today shows why it is not smart to chase performance. After Monday, a lot of traders, thought now it was a “for sure” time to short the market as it really cracked open. Wrong. Once again, the market, does the opposite of what everyone expects. The best time to short is if the rally in stocks fails near resistance or their 50/200 dmas on low volume. If after a low volume rally you start to see your stock selloff again that is your clear signal to short that stock. Make sure it doesn’t pay a dividend and make sure it is breaking down on HUGE volume and the low volume rally is on very low volume. This will help increase your odds of being right on the short side.

Also in this market environment, I am sure you sold a stock that you have now seen rally back and then some (ROCM FTGX). Big deal!! If your chart broke critical support and you sold to protect yourself from further losses but that stock has rallied back, don’t worry about it. You did the right thing. When I look at ROCM or FTGX, for example, I now see very ugly chart patterns that I would not want to be long if I was going to be making a new buy. Unless, that chart is perfect, move on. Keep your money in your best performing stocks in this environment and don’t worry if you sell a stock and it rallies back some. More often than not they turn out to be like ITMN. If the chart is ugly, get rid of it. If you are shown a loss, get rid of it, until the market fixes itself.

Remember, everyone, CASH IS KING!!!!!! Until this market calms down and all the emotional tug and war is out of this market, cash is your best friend. The market will take shape, soon enough. If it is to the upside or downside does not matter to me. As long as the trend is clear and in place. Right now, there is no trend. It is volatile and choppy. I am still leaning with my bearish bias, due to all the UGLY UGLY charts out there. But no matter what happens, I am ready.

Aloha and I will see you in the chat room.

Some of the reasons given for today’s selloff was the Yen hitting a 3-month high versus the dollar, the ISM service index coming in at 54.3 instead of the expected 57.5, the selloff in Asia, and the worst of it, in my opinion, from the scare in the subprime mortgage industry. Whichever one you want to pick, is the right reason. The fact that the indexes fell on heavy trade is all I need to know. But I know and understand why people need reasons so these are the ones I am giving.

At the close, the SP 400 and 600 led the carnage with 1.8% losses, the NYSE fell 1.3%, the Nasdaq lost 1.2%, the SP 500 lost .9%, and the DJIA full of big-caps held up the best only losing .5%. All indexes ended near their LOD. The worst performing indexes, I track, sadly, lead to the downside. The IBD 100 lost 2.2% and the IBD 85-85 lost 2%. This outperformance on the downside is the opposite of what happens during NORMAL pullbacks. There is nothing normal about this pullback. You don’t believe me? 54 out of 100 stocks in the IBD 100 lost 2% or more!!! And 14 of those lost 5% or more!!!!!! This is no normal pullback. You DO NOT get readings like this during normal pullbacks. Stock indexes are now at four-month lows.

Volume was higher on the NYSE, offering up another day of distribution (not like we need to count them anyways); and the Nasdaq’s volume came in slightly lower but still well above the 50 day volume average. So don’t take comfort that volume was lower on the Nasdaq. The amount of selling overrides that simple fact. Breadth was ugly with decliners beating advancers on both exchanges. Decliners beat advancers by a 4-to-1 margin on the NYSE and by a 14-to-3 margin on the Nasdaq. The selling was broad and strong. Only 4 out of 197 IBD industry groups finished in the green today and there were 66 new highs to 298 new lows. That is a lot of selling.

The big news of the day, imo, was the subprime stocks. Did you see the carnage out there? NEW fell 68% off a criminal probe, and off of that news FMT fell 32% and LEND lost 26%. The Finance-Mortgage & Related group fell 5%, the Building-Residential group fell 4%, and the Finance-Consumer/Commercial Loans group fell 3.7%. These were the clear losers in today’s session. And if anyone wants to see why I don’t try to bottom “guess” or “fish,” just go look at the charts of BZH and MTH.

There was some good news out there: oil fell back to $60 a barrel. That, however, is not seen as a positive by the market, as weak oil shows weak demand from the world and that can only mean a slowing global economy. Take a look at your oil charts to confirm that that game is over. TOT, SSL, and XOM show you what is going on. Nothing but hard and heavy selling. The other good news can be found in the VIX. The VIX jumped another 5% today; It’s a start.

The only index in the green, of significance, this year, is the SP 400 index. The worst index this year has been the Gold index. That index has lost 10% since the beginning of the year. Proving, once again, old leaders are indeed old leaders. Most former leaders do not come back and become the markets next big winners. Gold, this time around, was no exception. Nothing but pain in the gold charts also. It will not be fun for mom and pop who just bought all the gold off the TV and radio infomercials. Once again, the public, is the last to be in the know. The pros are selling on them.

There are a couple internals I would like to go over here. There are now only 66% of all stocks in the market (in TCNet) over the 200 dma. There is no really big deal about the number itself but considering that this comes after the number was at 86% last Monday shows that this market is in serious trouble. For what it is worth, this index gets around the 30-40 area for a good bottom. The percent of stocks over the 40 dma (in TCNet) has crashed to the 24% level. This reading was at 71% before the decline started. This selling has been fast and furious. A normal low happens around the 10-20 area so we are getting near that number.

With the 40 dma number down so low so fast it indicates to me we are getting a bit oversold. So we should expect an oversold bounce. However, since the stocks above the 200 dma are far away from there normal readings at bottoms, I would not expect a long-term rally off any bounce. Like I said, it would only be an oversold rally.

There are a lot of people trying to bottom call and most people are now expecting an oversold bounce. So I am not sure we would get it tomorrow. However, if most people think it will be a significant bottom and not an oversold bounce, then you can expect the indexes to rollover after that bounce happens. I don’t expect a bounce only because everyone is playing for one. Most of the time the crowd is wrong. Even though the crowd, via the total put/call ratio, is bullish at 1.68. Somehow, I don’t think this indicator matters.

Cash is king!!!! I believe it is not the most safe time to short NOW because we have come down so far so fast. But after a low volume rally, if the market is in fact broken, shorting will be the game. It already is paying off quite nicely for those who took my short recommendation. I am not taking my recommendations yet because it goes against my discipline of waiting to confirm we are going into a bear market. If we are, TRUST ME, there will plenty of time to make money shorting stocks. If you shorted AHM or NDE, you are very happy right now.

Aloha and I will see you in the chat room. If you are not part of the gold team, and you have any questions, don’t be shy to leave them below in the comment boxes. ALOHA!!!! Cash is king!!!!!