Tuesday, February 10, 2009

DoctorMad – Troops feast on Bull Slaughter…

Give the General credit where credit is due… who else drew in a very bearish down channel yesterday and told you that was a likely possibility? Well, he did, and because he has the vision his troops are feasting on pigman bacon tonight!
Turbo Timmy dropped a tactical nuke on the bulls with that lame excuse for a bank rescue plan. Looks like he is no different than good old Hank and he will likely be a bear’s friend in the future. By that I mean expect him to be a catalyst to start sell offs going into the future. The trend was set today and the market loves to follow up trends right up until everyone recognizes them.

Looking at the markets, there is no doubt the bears are now firmly in control on all time frames. Today was as bearish by all technical measures as the other starts of other major wave 3s in this market November 1, ‘07; June 6th, ‘08; and Sept. 22, last fall. My projection from last night is actually the one I still have on the chart. I'm also including a look at the blue wave 5 channel I have for this move. It's still way early to be thinking about projections so early into the move, but this wave 3 could take us below 700 by the end of the month.

Short-term the picture isn't quite so bearish. We could conceivable rally 25 more points and still be in a very steep down channel going forward. The only way the bulls can save this and regain the momentum would be a high volume break out above 877. Although it seems unlikely, you'll have to watch the volume when this does eventually retrace. As long as it's weaker the bears will still be in control.

My plan for deploying troops throughout this move is to close short positions or hedge long a bit at near where I think the bottom of this channel might be and then add shorts near the top for as long as the channel holds. Keeping a core position to try and capture a big chunk of this move. If this is indeed what we have, and the channel is more or less locked in early, you should be able to play ping-pong up and down the eventual channel while keeping a core position until we finally break out.

Before the bears can claim total victory they still have to defeat the pennant line and the bottom of the yellow wave 2 channel. With the heavy ammo (volume) the bears brought today I don't think the bulls have a chance. Still as of tonight, the bulls still control that important trench.

- DoctorMad