3SOF

Nice call setravis.  Enjoyed your last post.

Today is pretty brutal.  But I'm kinda surprised my stocks aren't even getting hammered worse...and we are kinda coming off the lows.  It would be nice to make some kind of a hammer on the dow, S&P, and nasdaq

What are your feelings on the market now?  I'm a bull, but have to admit days like these get me a little bit shaky. 

A pullback was anticipated yesterday, a fall off a cliff is what happened ! Now the question is, How low will the market indices go? There is a DJIA support level at 13,200, which is now only 85 points below yesterday's low price, and most of the indicators are close to being oversold. So the bottom appears to be near. Nevertheless, the market indices are expected first to move slightly lower, but not as precipitously as yesterday's plummet.

Just when things looked as if they had recovered from being polarized to the negative, they returned to that state .
This took its toll on the intermediate-term trend, which had been showing signs of rekindled strength early this week.
The percent of stocks in up-trends has also dropped below 50, down to 44, and will not be expected to rally until the value falls into the 30's. Thus, there can be very little upward buoying from the intermediate-term trend at this time.

When the DJIA did not rally above its 13,675 ceiling, thereby confirming a recommencement of a near-term uptrend day before yesterday, it meant it. Even though there were signs that near-term indicators were ready to turn up from their bottoms, the market indices shrugged off those signs and dropped precipitously.
All of this once again validates the adage that it is advisable not to anticipate reversals from bottoms but wait for both signals (oversold indicators) and confirmations (DJIA>13,675 earlier this week) before assuming the awaited near-term uptrend is in progress.

That wait may last one or more days. The trade-term trend took over the pullback yesterday, and a substantial sell-off ensued, became oversold in the process and thus some recovery in the form of a sideways to slightly up movement may be in store this morning. However, it is likely to be only a pause as the DJIA now seems destined to test its 13,200 support level before it can rally up over 13,500, which is expected to be the resistance ceiling after the bottom has been found. Trend-affecting movements of indicators and economic measures that might be catalytic. Clearly there are a number of important factors to watch, not the least of which are the lingering credit/housing market leading-the- way-to-a-recession fears.

For the third time in a month the DJIA tumbled 360 points, now erasing gains resulting from the Fed's September interest rate cut rally. The 2.64% fall-off in the DJIA was its fifth sharpest this year, and all components contributed, with all but two marking declines of more than 1%. Volatility, as measured by the VIX, hit a 6-week high at 26.49.

Financial shares again led the decline, with American International Group, hurt by weak property casualty and life insurance business, off 6.7%, American Express off 5.5%, Citigroup off 4.5% and JP Morgan Chase off 4.2%. General Motors shares dropped 6.1% on its news of a large, $3.9 billion charge as well as a deeper-than-expected earnings loss of $2.80 ex-items for the third quarter. However, this morning Ford's numbers beat analyst estimates on losses of 1 cents ex-items from continuing operations versus a 45 cents loss in 2006 and estimates of a 46 cent loss; moreover, the company projected substantial YoY fourth quarter improvement, with breakeven results before charges possible for the year. Markets continued to roil from the ongoing drumbeat of downgrades and greater-than-expected write downs. Moody's Investor Services said it might downgrade another group of structured investment vehicles, placing more pressure on implementation of the SIV superfund. Capital One and Washington Mutual, which - along with Fannie Mae and Freddie Mac - is facing legal troubles from the New York State's Attorney General's office on inflated appraisal accusations, raised their reserves to cover expected loan losses. And Morgan Stanley said it will take a $3.7 billion write down, at the low end of estimates, on valuation declines in subprime mortgage-related positions over the past two months, and expects losses could impact earnings by $2.5 billion. This morning Toll Brothers cautioned fourth quarter revenue for the period reporting December 6 will drop 36% on the deepening decline in the US housing market. Seeking a safe haven, investors bought Treasury's yesterday, with the yield on the 2-year note dropping to 3.59%, its lowest since June 2005. And gold prices continued their upward spiral, approaching an all-time high of $850. The euro climbed beyond $1.47 for the first time, and sterling hit a 28-year high of $2.107. In line weekly oil stockpiles checked the advance of oil in yesterday's trading, with Fed governor Mishkin also opining on a likely easing of oil prices. However, the prospect of $100 per barrel oil still loomed large as speculators chose investments benefiting from the weak dollar, and supply concerns entering the US winter season remained. Today's markets will look towards Fed Chairman Bernanke's Joint Economic Committee testimony (10:00 ET) for the Fed's road map, as the soft landing turns into a hard one, and the Fed's ability to stoke economic growth stumbles upon the reality of a free-falling dollar, with its risk of importing inflation at home. Analysts expect Bernanke to remain growth/inflation neutral, although poised to act should economic indications warrant, while also trying to avoid being boxed into a December cut by Street sentiment. Also on the horizon today, retailers report October same-store-sales, with Costco's printing at 9%, topping estimates of 5.6%, as higher gasoline sales boosted results. 

In the corporate corner, investors were heartened by news of BHP Billiton's bid for Rio Tinto, a $109 billion offer Rio Tinto considered too low. Cisco reported 40 cents for the quarter, topping estimates of 36 cents; however, the company failed to increase its revenue growth targets beyond its long-term projection of 12-17% and 13-16% for 2008. Motorola advised a possible acceleration of their share buyback program, now at $4 billion, as the company's cash situation improves. Marsch & McLennan reported 15 cents ex-items, off estimates of 32 cents, on poor insurance brokering results.

All of the near-term trend indicators have sunk into their oversold zones, indicating the market indices are expected to rally soon, but first the market indices are likely to wallow along current levels for a couple of days, so buyers are advised to wait for the bottom to be confirmed when the near-term trend indicators cross up out of their oversold zones and the DJIA rises above 13,200.

The near-term trend indicators can go lower too, but are so close to being in their oversold sub-basements now that a further substantial decline in the market indices is not likely. However, time and time again, experience has demonstrated it wise to wait for a signal and confirmation that a near-term uptrend is in progress. This may take a couple or more days. The signal will occur when near-term trend indicators climb out of their oversold zones and the confirmation will occur when the DJIA rises above 13,200 and stays there.

The catalyzing factors in recent abrupt trade-term trend movements have been the subprime mortgage debacles involving several large financial institutions. Since the underlying real estate blues continue, perhaps the worrying is not over, but the tenor has changed from shock to recrimination about timing of announcements. Therefore, a period of fewer surprises and thus quieter markets may be in store. In any event, the trade-term trend indicators became oversold late Friday, and thus should rally.