Just Another 2 Billion Share Day

Market Action:
When most people see the news about Thursday’s market they will hear that the Dow was down a modest 34 points.  While that is true, the market experienced another violent day.  The Dow started the day with a 200 point loss.  You might ask what caused that violence and the answer would be somewhat difficult to explain.  The news on the surface was that some inflation news attended the Personal income and spending report out just before the market opened.  Another reason was cited to be yet another round of declining global stock markets started by none other than China, again.

Whatever the cause, it seemed to give the market some confidence that the “bottom” was in and buyers rushed in.  A half an hour into the session, the ISM manufacturing index came in above expectations and above the magic 50 line meaning there is some expansion built into the index.  This news lit a fire under the already moving Dow and pushed it up so that it was only down about 65 on the day.  Over the rest of the day, some additional strength came in and put the index into the green for a while but it couldn’t hold and ended 34 points lower.

After the closing bell, DELL reported some unhappy news about its earnings.  The company failed to match expected and we might add reduced earnings and revenue numbers.  DELL fell a little in after hours trading, but not much.  

In other earnings news, GM is not going to produce financials this week.  GM is the owner of GMAC and an owner of Ditech, both of which are heavily into subprime mortgage lending.  But, as long as we don’t have to look at the cold hard truth, we can ignore it.

Opinion/Analysis:
Just some quick comments this evening:  First, the Dow seems to have completed its first down move with the early morning sell off.  So, from top (~12,800) to bottom (~12,060) there has been a drop of about 740 points.  This number should five us some information about the next couple of moves.  

We should see a bounce that will take us back up roughly 38% to 62% of the way down, or from 280 to 460 points higher.  That would take the Dow up to a range of from 12,340 to 12,520.  Thursday’s rally made it back to 12,290 so there is some room to move up before this correction (rally move) is complete.  

The next move after we get back up to the end of the corrective phase will be down and probably strongly down.  We should see about a 162% drop, at a minimum, of the first wave down, that would be about 1200 points or near 11,300 if the eventual second wave top comes in around 12,500.

We will explain more about this move over the next few weeks.  This week was just a preview of the selling we should see.  

The volume in the stock market was high again on Thursday, above 2 billion shares on the NYSE.  That makes three days in a row with volume over 2 billion shares.  This market has turned and this wave of buyers is in for a rude awakening.

Any rally attempts over the next few days should be used as opportunities to sell.  

Cash is back in the driver’s seat.

Dow Industrials:  12,234.34  -34.29
VIX: 15.82
HUI:  334.35
QQQQ:  43.13
RYVNX:   17.44
RYAIX:  21.78
RYCWX:  37.05
TLT:  89.74
BEGBX:  13.87