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Monday, October 3, 2011

Good Bye Bull Market

 It looked like we were not only going to hold support, but might even move up and test some resistance early on, but right about noon, an epic collapse began that picked up steam as 1114 fell. That left 1101, the August low, as sole life r death support, and that fell right at the close. Volume was quite high, and the selling was pretty broadly based, but the chief culprit was the financial sector. The market is sniffing out something there, and we may be having another Lehman moment coming any day now. Whether we bounce here or go into a crash is completely unknown at this point, but it is probably pretty pointless to make a guess (shorting here may actually be a low risk move, as any bounce is very likely to be weak). It is becoming quite clear the market knows the jig is up.

Even the Nasdaq is in trouble, althoughstill above (barely) critical support. Again, with the exception of a possible weak bounce, it is hard to see this going anywhere but down for at least the foreseeable future.

the Dow industrials are also hanging just above support, and have a price relative line breaking out, meaning thee will drop slower than everything else. 

Bombs away! The Russell 2000 has broken last ditch support. One thing to note here is that price relative broke down to a new low a couple of weeks ago: had you used that as a short signal you would be sitting on a very nice profit right now.  Apparently price relative is a good leading indicator in both directions.

Here is the villain today. The financials mega-caps (the so called "too big to fails") collapsed big time today (and that comes after a bigger collapse going back to nearly the beginning of this year). BAC, in particular, may be on the verge of failing, MS and C are apparently in big trouble, and even GS is feeling the pain. Couldn't happen to a nicer bunch.

Unless somebody (and I don't think Bernanke has the credibility left to do it) can restore confidence to the market, we look destined for a big drop, if not an outright crash. I have been calling this a bear market since the August drop, but today we cemented that statues with the break of 1100. Bear markets suck, but they sure give us bloggers lots to write about.

I will have the new highs update shortly.


Y.Y.B.C said...

Best of luck in this market. I actually took a gamble in TVIX and hope u did the same.

David said...


Good call on TVIX. I'll probably get in if we get a bounce at the open tomorrow. If we gap down, i might go long for a day trade.

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