Bears remain in total control slamming bears both to the bottom of the wave 3 channel and to the very edge of the November lows. Beneath here all the bulls have are some old fortifications laid down in 96-97 around 685 and a major trench at 600 between current levels and another 40% plunge to the high 400s.
Despite the awful long term look my base case is still that we bounce here and I have my favored count reflected in the chart. If the bulls don't manage a bounce here and we actually fall beneath the wave 3 channel then we might have a full panic retreat (crash), the bulls might be testing those 685 fortifications before noon EST. I'm continuing to bring more bear troops home with each drop down and I'm starting to plan for the eventual bounce that breaks the channel and current bearish momentum. Until that break happens though, stay short, lighten up as you go, and enjoy the ride.
I also included a chart of the long bond futures. I moved a few divisions short into that sector over the last couple of days as a partial hedge on my equity shorts and anticipating this primary blue channel holding initiating a wave 5 move down off the December 30 highs. My stop is a break above the top channel line which could happen in a BIG way if we get a big equity dislocation.
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