We were expecting a fairly heavy volume day but with little movement as the Top of wave C needs some time to mature. We saw some heavy volume, almost as much as yesterday, but the market decided not to let the top of the C wave simmer too long and retraced pretty much all of yesterday’s advance in the afternoon. This is the nature of a down market; weakness can appear virtually at any time.
Yesterday we gave you a lot of techo-babble about Elliott wave and other technical indicators, we apologize. The point of it all was that not all “reversals” are created equal. Yesterday’s reversal was trumped by today’s reversal and this type of trading should be making some people very nervous. After yesterday’s stunning reversal, the participants had to face a rout like today.
There was some good news for the internet sector tonight as GOOG posted good numbers and the stock traded up about 10% in extended trading. It is possible that news like that can carry the market for a little while but we still think the path of least resistance in the next four to eight weeks is down, rallies should be sold.
We have had our eyes on several sectors recently and see that the gold sector has been hit fairly hard with the HUI down about 15% from its highs. We wait for a good opportunity there. Our little gold mining fund closed at 11.81 today as mining stocks continue to be pounded. Glad we traded out when we did.
We have no good idea what will happen tomorrow with the market in a schizophrenic state, not knowing itself what it wants to do. We think the general trend is down and with spikes like yesterday, it keeps the bears in check and the bulls hopeful. These are dangerous times to be in the market, especially long. Be careful.
Dow Industrials: 10,281.10 -133.03
RYVNX: 21.93
TLT: 90.59 (the bond market needs a push)
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