SOX is leading the market lower

The markets are being led lower, not by the large cap stocks but by the small cap stocks. Check out SMH (semiconductor index), the Russell index, and the Nasdaq. These are the stocks that are leading the markets lower. This was noted earlier by John Murphy, an esteemed technician. And today, these were the indexes that closed lower. The Dow, S&P indexes closed slightly higher. Also, remember, that on the last and first day of the month, the tendency is for the markets to move higher. But, for me, the stock market is still heading lower and we are in the third wave. Stay in cash, or go short.

Hope trade fails

As predicted the Hope trade failed and the markets turned lower. The Dow closed below 10,000 again. This number is not really important but it is a psychological number for the Bulls. They made a big deal of it on CNBC when it was surpassed for the first time. When it goes down, the media ignores it. But everyone is aware of it and they don't like it. The other indexes also have their milestones which will be broken. The next milestone for the Dow is around 9600, and then 9200. I think these numbers will be reached and then broken. Stay alert! When wave 3 is finished there will be a powerful wave 4 uptrend.

the Hope Trade is back!

The Hope Trade is back! After being down for the past six sessions, the market made a dramatic move up. Traders jumped in and bought the rally. They hope that the market has reversed and will continue to go up. Next week we will see if they are correct. The market has to continue to go up on increased volume for the Bulls to be correct. If past history is right, the rally will fizzle out and the downtrend will continue. This is called the Hope Trade because in a Bear market, every rally is a Hope that the downtrend has reversed. When the downtrend returns, the Bulls, once again, lose hope and begin to sell their stocks. This can and does cause panic on the downside. Remember that we are in the beginning of Wave Three which can become quite violent. Wave Three has quite aways to go, definitely all through September.

Trending lower

The markets trended lower yesterday. Today's low was lower than July 19th. The next target low is around 9600. The triggers tomorrow will be the GDP report and Bernanke's speech in the after noon. $INDU - Daily Candlesticks: "

via StockCharts.com

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Dow ends up today!

But don't be fooled. This is not the start of a new uptrend. It is merely a reaction to the new lows made today. Remember, the market does not go down in a straight line. All of the indexes made new lows and then corrected. The main trend is still down. The downtrend may resume tomorrow or in the next few days. But today the dow went below 10000 before correcting. I believe the Dow is headed 800 points lower to around 9200. The other indexes will also go down. At that point I believe it will have a significant rebound and I should cover my short positions and either go long the market or go into cash. Check out the Dow chart to keep it in perspective. Click on the chart to make it larger.

World indexes are trending down

Stock markets all over the world were down today. Many commodities were also down. The media is telling us that the cause is because of the housing report that came out today. The report told us that fewer houses were sold this quarter and this caused the markets to go lower. But anyone who has been following the financial news knows that when 10 percent of Americans are out of works, people can't buy anything. So, it is not only houses that people are not buying. Back to school shopping should be going on now, but the stores are empty. Lack of jobs is the real reason the markets are going down in my opinion. Tomorrow the markets may go down again. When the markets do reach a bottom, there will be a massive correction. But this reversal may not happen for a while.

Tomorrow's housing report will move markets!

Unfortunately for those who are still holding stocks, the market will not like the news concerning house sales. It is expected to be bad news and the markets may go down. Today, the markets declined rapidly during the last hour. Check the Dow index, it closed around 10150, which is about 100 points lower than when we last looked at the chart. The support for the dow index is around 9650 which is 400 points lower. The stock markets all over the world, including Europe and Asia should continue to go lower.

Semiconductor index leading markets down

Most of the indexes closed down on Friday continuing to confirm the downtrend. Small stock indexes very often go down before large stock indexes such as the S&P index. A small stock index would be the Russell 2000 index. Another small stock index is the SOX index. This is the semiconductor index. This index is the first index to close lower than its previous low. The significance of this is that this index if full of stocks in the Nasdaq index. So, the SOX Index will drag the Nasdaq index down. However, it should be noted that not all Ellioticians agree with this scenario. Caldaro, a noted Elliotician, thinks that we are really in an uptrend. He bases his opinion on the wave count. He sees five waves up from March '09 to April '10. I see only three waves up during this period. Ellliot theory states that 5 waves up would indicate an uptrend. Three waves up indicates a corrective move and is therefore a downtrend. Time will tell whether we are in a downtrend or an uptrend. Stay tuned.

Dow may go down

The indexes closed down on Thursday and may continue going down today (Friday). Today is options expiration day and that is often a market mover. Moreover we are going into the uncertainty of the weekend. There is a strong probability that the markets will continue their downtrend. However, the trend will be confirmed when the Dow goes below 9600. Today it stands about 10250. We appear to be in the beginning stages of wave 3. Keep a chart before you to keep your perspective on the intermediate trend of the markets.

short terrm trend is near the end!

The short term trend is close to ending. You can see from the above chart that it did little damage to the downtrend.
Could it go higher? Of course it could. But the probability is stronger that it will not go much higher and will resume the downtrend. And everything about the market is probability. Wall Street resembles a casino and don't let anyone tell you different. Know the rules of the game. Or your money will be taken away from you. Remember, in a bear market, the market moves down in five waves and corrects in three waves. Right now the S&P market is trading between 1097 and 1080.

When it drops below 1080, you will know that the downtrend has resumed. Be in cash or short the market.

the downtrend will continue..

yes, the downtrend will continue. Yesterday, we said that the market was oversold and that it might be up for a few days. Today's rally did not change anything. It did relieve the oversold condition a bit. The market may be up again tomorrow but it will soon resume the downtrend, The benefit of being an intermediate term trader is that you do not have to react to every move of the market. Today the short term traders were in a state of panic and many lost money. You should be in cash or be short the market. This market has a long way to go down. The news today was not good but CNBC did everything to give it a positive spin. Beware of the media. The media is not your friend. But, is it possible that we are really in a bull market? Yes, it is possible but the dow would have to go above 14000, if it's a bull market. Today it is around 10400. Stay the course and be patient. Right now the market is bearish.

markets oversold short term

Today's markets didn't go anywhere. The volume was very low. The Dow was down slightly and the S&P and the Nasd was slightly up. But we know that the markets are oversold and could turn up for the next few days. Then the downtrend will continue. Continue to hold cash or go short. I am not a short term trader but I am waiting for this trend to run its course downward. Then I would hold cash or buy long for the minor 4th wave. On studying the charts I noticed that the major wave 1 lasted 13 months, and that major wave 2 lasted thirteen months. If we are in a 13 month cycle, then the current wave which started in April will end in May 2011. The prices will be lower than they were in March 2009. October has been known for its stock market declines. I would be wary of a 3rd wave decline starting in October 2010.

Hindenberg Omen

This has been all over the internet this weekend. If you don't know anything about it check the Wikpedia article on the Hindenberg Omen. It sent a signal on August 12th. It means that a market crash is coming. I have been talking about a third wave which is sometimes similar to a crash. So the Hindenberg Omen confirms that the third wave is about to occur. Of course it is not absolute. Nothing is absolute. I have been reading the book on "The Balck Swan." The main gist of this book is that something may come out of the blue to upset any theory that you might be following. As I said, nothing is absolute. Everything is probability. Keep in mind that Wall Street is just one large casino. It's a game so you must know the rules. Check out the NASD INDEX . It does seem to be leading the other major averages. It closed around 2100 and will be under 1300 when this third wave is over. Check it out.

Down she goes!

The stock markets appear to be in a downtrend. Note the S&P index. It rose from the 600's in March. It completed a three wave correction rally in April. (A, B, C) at around 1200. It then fell to around 1080 and tried three times to go above 1130, and each time it failed. It is now in a wave 3 decline and ended on Friday at 1080. Although it is short term oversold and may rally on Monday, the decline will probably resume. A third wave can be spectacular and sharp. This decline will ultimately end below 666, its previous low. It is interesting to watch it unfold.

wave count 2

This is my wave count. Wave count is important in determining where we are in the market. Knowing where we are is very important because it tells us when to buy and when to sell.

Wave 2 began at dow 8250 and ended at 11250. Wave 3 down began at 11250 and small wave i ended at 9500. Wave ii ended at 10700. Wave iii is now in progress and today is at 10250 and headed lower.

Down trend confirmed

It is pretty clear that the downtrend has started. Keep in mind however, that the market is oversold in the short term. You are now fairly safe to short this market. Hold the shorts until the end of this move. When does it end? I use Elliott Wave Theory. This tells me that we are starting wave 1 of a five wave downtrend. I expect this move will last at least two months.

Some trend lines broken

The Dow index has not yet broken its short term trendline. Other indexes such as the NASD has broken the short term trend. Although I am short the market, prudence says to wait until all averages have broken the line. Be patient! If the trend has reversed there is plenty of time to make a lot of money,. The danger here is for those who are long stocks to stay long and hope for the market to go up. They may lose a lot of money and it may take years for the markets to go back up. This is an important turning point. This is not a short term move. This is, at the very least, an intermediate move. This downturn will last for at least two months, maybe longer. Take action as soon as all the averages have broken their trend lines. This may happen as early as today.

Has the trend turned?

It is too soon to declare that the trend has finally turned. However, we are close to confirming it. Another day like today and we can say the trend has turned down. The futures tonight do indicate that the market will continue going down. But we have been fooled before so we know we have to be patient before jumping on this bandwagon. Everything is supporting the change in trend so the rest of this week is important.

Has the trend turned?

Market up on low volume

yes, the market is up short term. And we are still waiting patiently for the reversal.. When the market goes up on low volume it makes the whole move suspect. Main Street is not buying stocks, they are buying bonds to avoid risk. They have been hurt enough. This is Wall Street buying and selling to Wall Street hoping to suck in the retail trade. They will not buy stock for a long time. Today, the market went up on the lowest volume of the year. It is meaningless. The advance-decline line is also in a downtrend. Yes, short term you can make money in this market but when it reverses it will happen very fast. Stay in cash or be short. Be safe. The market is getting close to a change in trend every day. It is coming. Be prepared!

One move does not make a trend

no, a trend is formed over a longer period time. If you are a short term trader you would be encouraged to buy stock as it appears to be going up to test 1131 again. It has failed twice. An intermediate trader is still looking at a downtrend. But we have to be cautious now because Relative Strength, Macd, and Stochastics and PPO are signalling a change in trend. Is it for real? Only time will tell. Hopefully the short term will resume its downtrend as well.

Stuck in the middle

The markets appear to be stuck in the center of the trend. High in S&P is 1131, and low is 1113. Waiting for the market to break either way. Who will win this battle, the bulls or the bears. The employment report today may be the catalyst. Be patient.

when will wave 2 be over?

No one really knows the answer to that question. but we have had several false alarms. I think the market will go down after it completes the wave 2.. We just have to be patient. Any day now. soon, I hope.

Bear Market lives on!

After the impulsive strong move up yesterday, there was no followthrough at all today. The markets resumed their downtrend including all the major indexes. Is this the beginning of the long awaited "C" wave or wave 3? Time will tell. I believe probability favors the continuation of the downtrend. Intermediate traders are still short or in cash. Many of the day traders lost their shirts today. But they may try to move it up again tomorrow frightening the shorts that are unsure of their trade. Be patient and you will reap the reward.

The Markets surprise move!

The stock market indexes made an impulsive move up today. As we always warn, no one actually know where the markets will go on a day to day basis. We are in a bear market and volatile moves in the opposite direction do happen frequently. Can you make money on these moves? Only if you are a day trader! This may last for a day or two, and then the downtrend will assert itself again. It will be interesting to see if the market follows through with the move. Stochastics and MACD still support the bear market thesis. For the intermediate term trader, it is painful to watch this kind of impulsive move but this is part of the trading game. Be patient and you will see the market move down again, and new lows made.