S&P 500 - Jan 14, 2009

charts courtesy of stockcharts.com

Expanding volume, heavy distribution, many decliners: Broad based selloff, and rally in Treasuries.

We said the stage was set for the bulls to show they were alive and capitalized. Bulls got all eaten, brought back, and eaten again by the bears.

The 850 area of the range we have been watching broke down, and index did not have any meaningful bounce during the day.

Down volume was very heavy, and decliners outpaced advancers 9 to 1. People did not seem to be in any mood to wait for the often-talked Inauguration Rally, well, we still have a week.

Breadth was awful today.

Short term momentum is oversold, but daily momentum still has room to sink. We should remember that if this is an intermediate wave 5 down or primary wave C down, then oversold on 60-minute chart or even daily chart may not mean much.

The MACD cross I wrote yesterday as a thorny thing in the market picture was indeed a bad sign.

This decline brings forth the intermediate wave 4 scenario.

Primary wave A is till technically possible, but the advance since the low of November 2008 has been too shallow and short to easily pass as B wave of primary degree

This is a closer look at the waves

When I was writing the following yesterday

For trading purposes, I should keep in mind that we are operating in the broader context of a bear market at the moment. There is no saying that the waves are not going to extend themselves downwards. Also, I can count this in bearish ways as well. So, in addition to my count, I shall seek guidance from other measures as well, moving averages, momentum, trendlines, whatever, to better define my stops and detect the change in the short term trend.

I try to find different ways of saying the same thing not to become too repetitive. Let us not get too tangled into the minutiae of every wave on minute charts, the same way that a longer trend is more significant than a line we draw on a minute chart, larger waves are more important than smaller ones.

I had no idea that we would get a perfect shorter's day today.

Despite the fact that I was leaning towards the bulls (guilty as charged), I had a wonderful day today, only because I never risked much on the long side, took profits along the way, got out of my bullish stance when 915 area of S&P gave way, let my stops be hit, and got interested in the short side of some of the strong stocks of the rally, the gold diggers. All of this has been expressed in my posts one way or the other.

Food for Thought: One must be from a different planet, or totally detached from the markets, not to have known the range within which the market has been operating these past few weeks (months?). Now that almost everyone expects a march straight down from here to the depths of hell, what if market fools many, if not all, and does something like this?

Let’s call it the wishful count, but not get sidetracked! It is the bear till bulls prove themselves, and so far, what I have seen from the bulls, has not been par for the course

In a post of January 4, I listed a set of conditioned that I would have liked to accompany the rally. Have a look, every single one of those conditions was violated. Well, one minor exception, maybe: Nasdaq did briefly outperform S&P.

PS. As I am writing this, people are still shorting the future market. Where were these after-hour shorters during the day? Who are they? Is the shorting party still serving treats?