Well I was wrong. I really thought the market would hold in but this move lower has been stronger and deeper than anticipated. No doubt this is a new wave lower whether it is somekind of 5th wave or a bigger kick off move down. My line in the sand was 1140 and this was broken last night with relative ease on good volume. I guess overconfidence and my recent good run impacted my judgement. That's what stops are for.
The market will do 1 of two things here. Either the S&P500 will test the 1100 lows and hold in setting up a double bottom trade, or we break clean through that will lead to a strong drive down to 1040/1015. Obviously I don't know which setup will prevail in the coming days. I do know that panic situations like this always lead to very good opportunities for those who are planned. I also know that the market looked and felt just like this in 2008 and a double bottom was made in March 2008 leading to a very substantial rally. Fear now, just as it was then, has reached a fever pitch. Is it different this time? The parallel scenario I have been following is shown below.
I also believe that the DAX has put in a very good climatic bottoming pattern and thus should hold its recent lows. This is the heart of the crisis. Any continued rally should bouy global markets. We will soon find out.
S&P 500 Parallel Daily:
There are a number of mixed signals in Asia. The ASX200 is testing its August climatic lows but no new lows have been made yet whilst the Hang Seng has plummeted through support. Copper continues to breakdown and the A=C possibility is completely off the table. Its Friday and I doubt there are many willing buyers into the weekend with this market. The S&P500 looks like it is overdone in the very short term and I would not be surprised to see it hold tonight with a small bit of short covering.
One final point. In these panic situations, Governments will do all they can to stem the bleeding. Sure it doesn't seem that anything is working currently. However, they will continue to drive a tank into this to try and rectify the situation. This leads to very squuezy markets so make sure you are in positions you can get out of.