The major stock indexes suffered a higher volume sell-off today, with the Dow industrials falling 1.3% on NYSE volume of 6.8 billion shares, while the NASDAQ dropped 1.2% on 2.0 billion. The leadership profile has weakened considerably, though remains positive for now, with 227 stocks making new highs versus 73 making new lows.
The short term momentum oscillators remain negative, non-confirming the bullish stance of the AlphaKing Trading Indicator for the NASDAQ (while the Russell 2000 AK Trading Indicator remains negative.) We have no new trades at this time.
The failure of the bulls over the past week or so to enact a successful breakout gave the bears the chance to force some distribution selling today, and the uptrend is once again in danger of reversing. The key, once again, is the presence or absence of a follow-through, either tomorrow or early next week. Such double-whammy pushes have failed to materialize over the past couple of months, which is why the stock indexes have been unable to break out of the current sideways churn trading range. The close on Friday remains extremely important as to what happens next.
Tomorrow we will publish our forecast issue, where we outline our expectations for 2010. Below is what we wrote on December 26 last year, outlining our expectations for this year. I think it is fair to say we got the major parts of that analysis spot on, with a failure - delay? - in the resumption of the bear post mother of all bear market rallies the lone misstep, and today‘s sell off may very well be the start of that expected plunge post sucker rally peak, thus we may end up hitting a home run on that one too. Tomorrow's forecast should be an interesting read.
“Trading expectations for 2009: while some short term volatility may see a tad more upside to the current rally push, we continue to expect that the rally would likely soon fail as wave 4 completes, and a collapse to major new lows in wave 5 lands to complete the FIRST giant wave of this bear market that began in October '07. Once the wave 5 smash and grab raid scares the heck out of complacent bulls, we expect the mother of all bear market rallies to land, whereby the indexes retrace 50-63% of points lost in the great bear from peak to whatever the ultimate wave 5 low turns out to be. That mother of all bear market rallies should then lead to the mother of all crashing bears into the fall 2009 and beyond.”
401K investors should be invested in a money market fund.
Kevin Wilde, Chief Trading Strategist AlphaKing.com.
