*** TA Update (intra-day) ***
The market futures were in crash mode before the opening and the global stock markets were mostly down sharply as well, leading to a Dow which was down over 400 points and the Spx being down over 50 points to a low of 852, testing the 865 prior low but not the 839 level yet.
Market internals are extremely negative with the 90% criteria kicking in on both exchanges for breadth and u/d volume but overall volume was not extremely heavy. Usually capitulation does not occur in the first 14-30 minutes of the session so it is prudent to be skeptical of this fall as being a selling climax.
On the charts, it appears there is a good chance of another leg down, that is, for 839 Spx not holding, as a test of today's low is likely later today, and unless we get a selling climax later today, we will end the session down and that could lead to overseas markets crashing again early next week. That could lead to a tradeable bottom next week but at much lower prices.
If 839 does not hold, then watch for 783 and 768, for the Spx rather than the widely followed Dow, which has been a bit stronger than the Spx. The pros watch the Spx closer than the Dow as it is the benchmark for the U.S. stock market, not the Dow.
We could yet see the expected 100 VIX or slightly higher, and a Dow being down 800-1,000 points, which I've mentioned in the past. Short sellers combined with forced liquidations/redemptions can exaggerate price swings and it is apparently not over yet.
Crude oil looks headed for at least 60, having broken support at 68 a few days ago and then having a failed rally, just as the Spx did, and today it reached the 63's early this morning before bouncing.
If the market plunges over 400 points today, expect crude oil to fall as well as it has been highly correlated with the market trend. Add to that the strength of the US dollar and you have a recipe for crude oil and gold to sink further. Crude oil in the 50's is a real possibility next week, and it might eventually try to test 50 if the market plunges to the mid 700's Spx.
I don't like the idea that CNBC keeps saying the decline today is orderly rather than the expected crash as indicated by the futures. Orderly means that panic selling is not severe enough and portends another round of severe selling today or early next week.
Capitulation/selling climaxes are never orderly. Many people like Hogan on CNBC this morning (who is tooting his horn for calling a bottom this morning), Carter Worth (a very good technician on Fast Money who said he was all in long several days ago and gave a strong buy signal over a week ago), are bullish now.
So this time the market is taking no prisoners, even many experienced TA guys, as the decline is incessant. It will end in at least a tradeable bottom (probably not a final bear market bottom yet) in the next week if it can crash enough, but if the market rallies before a true capitulation, then bounces will fail and drag the downtrend out even further.
One major problem I see is that the global stock market and countries seem to have more problems to announce than even the U.S. has. And when their stock markets crash, we are affected.
Plus almost every company reporting earnings will necessarily have to report much weaker guidance for next quarter and '09, and even though that is expected, having to see them report it makes it hit home completely.
It has been hazardous to try to catch a falling knife, and the only chance one has to do so is to discern a selling climax on a huge spike down. We have had quasi-capitulations which have worked for hours or days but they have all failed rather quickly.
There needs to be enormous panic and fear in the marketplace for a selling climax and that is hard to attain when everyone's tolerance for pain has risen due to all of the shocks and shots that have been taken by all.
So it will take an enormous selloff to cause true panic.
regards,
drbob |
