The Trend Is Down

Well, the market spoke loud and clear Friday by selling off after passage of the bailout plan. There may be a lot a volatility, but the trend is clearly down until we get a climax selloff. The Dow has now closed twice below the September low and below the 50% retracement of the 2002 to 2007 "bull" market at 10698. There is weak support at 10000, 9871 and 9708. After that the next support is 9043 and 8695. I expect that the lower support levels will be hit in the next two weeks, but if not, then by mid-November.

The next expected short term bottom should be around October 15, 3 months from the July 15 low and 6 months from the March 17 low. As I discussed in an earlier post, these types of calendar dates work very well for projecting market turning points. Do not expect that any low around the 15th will be a lasting low, however. The 10 month cycle low projects to November 19 and/or December 5, 6 months from the May 19 and June 5 highs. We could see a double bottom. A sharp rally may ensue from the October 15 date, but it will be another shorting opportunity, not a buying opportunity.

Elliotwave International's Short Term Update confirmed my 3rd of a 3rd analysis in the Qs on Friday. The Qs may bounce from the 34 area at the October 15 date, but if, not then the next target would be 30 or below. It looks now as if the entire advance from 2002 to 2007 in the Nasdaq 100 will be retraced by March 09 in the span of 18 months.

If you want to understand better how the market could be falling so fast, please take a look at Carl Swenlin's analysis this week at http://www.decisionpoint.com/ under chart spotlight. He shows very clearly that the market is still very overvalued, regardless of the fact that many are calling this the buying opportunity of a lifetime. If that is true, then by 2012 we should have the buying opportunity of the millenium, so long term and value investors would do well to accumulate cash for now.

If you are looking for simple, clear and effective trading methodologies, check out http://www.marketclub.com/ and INO TV on that site as well. Adam Hewison has presented several videos demonstating their trade triangle techonology, which I find to be the easiest profitable system to implement that I have ever seen.

Note: comments on this site are welcome.