S&P 500 - Nov 19, 2008

charts courtesy of stockcharts.com

The widely watched and repeatedly tested 850 area of S&P collapsed today. No miraculous rally to make this a so-called reversal day. Should we really be surprised? How many days have we been plotting our charts with more new lows, and more decliners than advancers? On Nov 5, we discussed a high bullish sentiment reading, and I wondered whether it had something to do with people scared of missing the bottom. Well, they have a new bottom to start from.

Look at the down volume, or should I call it the dump volume?

I am going to relegate the count that had Oct low as primary A to lowoer priority order. Although it still is technically possible, I don’t think it is very viable now. Marking Oct low as minor wave 3, I can present these three short term counts

It has become easy to start the day with cash, watch the first 30 minutes or hour of action, pick some spots and short the market, and, as it falls, short more, and more. When it becomes easy, I become extremely cautious. Remember how easy it became to buy coal stocks and make money? Remember how easy it became to make a deposit on a not-yet-built condo and make money? Remember how easy it became to buy the now defunct JDS Uniphase and make money. It has now become too easy to short the market and make money – and that ease makes me wonder that maybe the shorting party is in its very late hours.

But my gut feeling and intuitions aside (they usually are wrong), 850 is now the level to recapture and hold, and 767 is the 2002 low (another level of obvious importance – too obvious, perhaps). In between, I have two pivots: 795 and 823.