Tuesday, March 3, 2009

End of Day 3/3

Well, the day went exactly as expected with a move basically sideways across the channel and then collapse. The small wave 5 of 5 of 3 of 5 may have begun at that point as the futures are free falling after hours with the DOW futures reaching 6,600 on news that PALM (maker of smart phones) revised earnings down 40%! Their stock was halted and Nasdaq shares plunged. The money hiding out in tech deserves it for being stupid.

It also sounds like Blockbuster Video is going to have to file for Chapter 11, Netflix stock jumped on that news. Shares of BBS plunged in a free fall all the way down to 13 cents a share! That’s the risk of holding or trying to bargain shop in this environment.

And what an environment it is! Today was the 15th down day out of the past 16 for the transports. Wasn’t it just a month ago that everyone was buying them because oil was plunging? Oh, and don’t forget a year ago when Buffett was buying the rails… that meant that we were out of the woods, remember? More free falling and more bottom calling morons – the latest of which was our own President who confidently announced that stocks are a bargain at these prices! Okay, how about we pay him in Palm, GE, AIG, or Blockbuster shares and see if he sings the same tune?!

And what’s wild to me is that fear is low! The VIX actually fell today as did the Put/Call ratio which settled the day at just .95. That’s NOT what bottoms are made of in case you’re wondering. Too many people looking up.

And I haven’t even talked about GE, one of the largest companies in the world and still rated AAA with a stock price that’s now $7 with talk of bankruptcy swirling and put buyers galore. More free falling.

But on the day today, the DOW only gave up 37 points (.55%), the S&P lost .64%, the NDX gained .37% with the help of the previously mentioned morons (Nasdaq down .14%), and the RUT lead the way lower giving up 1.9%. The XLF coughed up another 2%.

The internals showed some stress that wasn’t evident in the indices with new lows advancing to 738 on the NYSE. Declining issues were 2 to 1 over advancers and declining volume commensurate with the mild decline.

Want to be really frightened? The dollar index poked its head above resistance and into clear air before falling back a little. It was enough to trigger a breakout and higher target on the P&F chart. Target? 112! Trust me, if that target is reached anytime soon, you do not want to own stocks, you want to own canned goods!

Let’s look at a 20 day, 30 minute chart of the SPX. You can see we closed right on the 696 pivot but fell well beneath it after the close (686 as I type). The red channel comprises wave 3 down of 5 down and you can see that we’re starting to bend the channel a little bit on the downside. The small black microchannel is wave 5 down of 3 down and could end pretty soon, although it didn’t end today I don’t believe. It is possible that it ends soon, though, and gives way to a larger wave 4 up/sideways, but we may need some type of capitulation first. Here you can see that there’s room for the stochastic to move lower, same with the 60 minute, but the 5 and 10 minute are already oversold. That’s one heck of a wave, 182 points already. Now that’s free falling although it may not feel like a crash because the fear has not struck fully… yet:

Here’s the SPX daily, a pretty standard red candle, the 11th of the past 12 sessions. This now really looks and feels very similar to the October decline as I’ve been pointing out. But while it’s been the equal of the wave 3 crash point wise, it’s been more in terms of percentage loss for where we are so far. The deeper we get the more real damage gets done – you are beginning to see that with bankruptcies of companies that were just hanging on before:

Here’s the DOW daily. The Candle looks like a spinning top, but the DIA does not, it’s a red bodied solid candle, also on slightly lower volume. The declining, but still pretty heavy, volume the past 3 days again shows a lack of fear as the supply has yet to show up in mass (vol on the SPY was slightly higher than yesterday):

Really that’s about it on the charts. The only other unusual thing I see is a black spinner on the NDX, and a covered black hammer on IYR that doesn’t look like anything positive to me.

Yes, we may be getting close to a short term bottom, but I don’t think it was today. Personally, I’m starting to get scared. My personal VIX is way above 100! That’s because I see technical targets way down there and now I see a dollar index with a target that if achieved will fulfill the horrific technical targets I’m thinking of (pennant targets sub 300 on the S&P). The consequences of reaching them will be severe for everyone, you will not escape the fallout. I sincerely hope that it doesn’t turn out that way, but unfortunately I see a lot of free falling now and in the future as well.

Tom Petty & the Heartbreakers - Free Fallin':

PS - Of course anytime you see a blogger post Petty Free Fallin', that's probably your cue to go long! LOL