Bears remain in complete control as the bulls spent another day not only unable to mount a serious offensive, but losing a little more ground. Meanwhile the bear supply lines are catching up (oversold working off) and more room is opening up to the downside of the wave 3 channel.
The trade right now is simple. Stay short as long as the top line of the channel holds. Take troops home when we near the bottom of the channel and put some back to work when we are near the top, but net on net working off short positions and starting to prepare for the bull bounce that is coming. That bounce may still be several days away. The only thing I know for certain is it will come without warning and you better have a plan ready for when the bulls break this momentum. Until they do however, sit back and enjoy the ride with your bear troops taking some home on each break lower.
If you happen to be still bullish right now and picking a bottom or double bottom then you might want to panic if it starts to look like my wave 3 of 3 of 3 count on deck is right. You could lose a very quick 5-10% or much more if you get caught on a stampede break to new bear market lows. The margin clerks might be very busy this weekend.
Got that right about the margin clerks, Doc, especially those at Goldman who are having to collect margin calls from their own executives – couldn’t happen to a nicer bunch.
Hey, let’s give the Doc some tunes for his soldiers… I read his title and this tune popped into my head, just substitute the word “Band” with the word “Bulls!”
Paul McCartney- Band on the Run: