Advisors Throwing In The Towel

I was not at all surprised to see a rally today. As I said yesterday, I was sure a rally would come after being stopped out. But this should not be a surprise given what has happened in the last week. Many traders have probably jumped in to try and pick a bottom given the bullish divergences setting up. After these same traders were stopped out by yesterday's decline below the SP500 low of October 2002, there was little selling pressure today. What is most interesting is that a number of advisors that have been saying that the market was building a bottom have now thrown in the towel and turned bearish. We see predictions of Dow 6000 and SP500 at 600 just ahead. I agree that eventually these levels will be seen, but not near term. To me this capitulation by the bullish holdouts is a bullish sign, particularly since we are within days of my calculated cycle low date of 11/26.

At this point I see two scenarios playing out next week. Number one is that we trade up on Monday and down into Wednesday mid-day to put in the final low of wave (3), or number two, we trade sideways to slightly up next week followed by selling into December 6+/- to put in the final low. If we get a follow-through day without another low, then the low is already in as of yesterday. Given the typically bullish bias surrounding Thanksgiving I will be looking to take another long position on any new low on Wednesday. If we do not see a new low, I will wait for a new low after Dec 1, or a follow-through day or macd buy signal to enter a new long position. I will then add to any long position on subsequent trend following buy signals such as the 3 Week Rule or Monthly-Weekly-Daily Rules shown in the System Tracker.

What I am not expecting is another extraordinary sell-off ala October. If it happens, then so be it, but the time is running out.