Tuesday, February 17, 2009

DoctorMad Update - Onward to Paris…

The General has studied battles of old and thus he could see the weakness in the bull’s defense. Last week he warned that a gap down below the 800 level would be a flanking maneuver that would catch the bulls by surprise and raise the cost of puts before most could react. Thus you were either prepared for the battle last Friday, you stayed out of the fray, or you died via a bear mauling.

The Doc puts a lot of work into these battle briefings, I hope everyone heeds the sage advice…
The bears completed their successful long weekend raid around the Maginot Line and under 800 SPX via the futures and a good bashing on the European and Asian Indexes. By the time the bulls woke up this morning the bears were already behind their lines and launching raids on important big cap stocks that lasted the entire day right into the close. There was absolutely nowhere to hide and the bulls never seriously mounted an attempt to retake the important 800 trench.

The “cools” have it by a vote of 9 to 7 so I'm going to try to keep the charts clean by hiding old channels. I will still post the weekend updates with all channels shown and I will always keep up all the relevant longer term (yellow level and higher) channels. Even with the old channels hidden today's battle map is still a little complex. I've overlapped an alternate light yellow wave 3 channel that is pointing straight into the ground. The bulls better at least break the bearish momentum of at least the OH #!&% ME alternate wave 3 channel or the slaughter will be worse than the Polish Cavalry charging the German tanks early in WWII.

I also included a chart of the VIX. The bears broke out of the Trojan horse and immediately pushed up the price of puts on the open. Despite the breakout the bears weren't able to make much progress and printed a free air potential reversal candle. Perhaps a retest of the break is in order, but that will only happen if the bulls manage to organize a counter offensive and retake 800. If they don't the price of puts and fear in the market are likely to skyrocket.

Be careful, stay small, and remember to bring some troops home along the way as the bears mount what looks like the start of a major new campaign.

- DoctorMad