Hi Susan: The weekly and monthly charts look very bearish. We had 21 weeks from the October low to the top and just completed a 5th week down. I have no idea whether this is wave IV, wave (3) of 3 down and the top is already in, or wave A of a giant A-B-C correction. I agree that a bounce is appropriate here, but will it be for 2 or 3 days, or 2 weeks? My guess is 2 or 3 days. After watching all the newscasts tonight, there was absolutely no panic. Everyone interviewed said they wished they had more cash to put in the market to scoop up incredible bargains. But that begs the question, if everyone is already invested, where's the "fuel to light the fire" coming from? (I'll check more media sources this weekend to see how the spin is going.) Without a mega-crash, I think 8 weeks is the minimum correction, and 13 weeks more likely before I quit selling the rallies. Of course, that is something that I reassess every day. If this turns out to be similar to 1998, we would have a "doji" week (very wide ranging because of the volatility), and then continue the decline into the 8th week, rally for 2 or 3 weeks, then spike down for a washout. I also think that before a solid bottom is in that the VIX and the P/C ratio will stay oversold longer than before before simply because everyone follows them now, and it would be just like the market to screw as many people as possible.
I wouldn't be surprised to see the monthly April or May candlestick penetrate the lower Bollinger Band. I think the monthly %R will go below 20 and then turn up. The weekly stochastics trendline from the '98 low has been broken, and the various weekly indicators need to turn up from oversold areas before I become bullish. Prechter has been burned so many times, that he may be right this time, but like the boy calling "wolf", no one will believe him. With all the problems with liquidity and leveraged disasters that I fear are waiting in the wings, I am first, and foremost, protecting my assets. Right now, I am looking for a bottom in gold in June, but I'll hop on board if it takes off.
P.S. Above all, make sure if you are going to trade when all hell is breaking loose, that you can get through to your broker (or brokers). Before this decline is over, I'm sure there will be many horror stories of complete inaccessibility to online brokers and of constant busy signals when trying to reach phone brokers (who will be overwhelmed by volume or will simply refuse to answer). Oh, and I would depend on a broker whose house is in order and has deep pockets.
Regards,
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