S&P 500 - Feb 19, 2009

charts courtesy of stockcharts.com

More of the same: controlled selling off a tight tape.

Very, very orderly: man I love that line from some bubble head of the bubble vision. I remember it from the dot.com crash days of 2000. All these companies that were supposed to grow business 100% or so, year over year for so many years were imploding, and the bubble vision guy off the floor would utter some drivel like there is selling but it is very orderly.

OK, I'll try to not use it too, too often.

We expected a bounce, markets tried at the open and failed and kept bleeding slowly into the close.

In my books, until we see some signs of capitulation, this leg is not over, but some sort of relief rally should materialize soon. So, I will be very careful with my short positions. I revise my game plan at night, decide what I would do at different price levels or technical situations, and then let the market do its thing.

This is a 60-minute chart of the index. I am still keeping the alternate count. It has become very unlikely, but technically possible. I have also computed some levels for the alternate count. The main count needs more waves down, and should exceed November low, or at least match the November low.

Dow is already at November low

There are some positive divergence being built. We just need some bulls with their backbones still intact to give us a rally.

Regardless, I play the charts, and so far they have kept me on the right side of things more often. I just think I need to be cautious and devise my day plan with tighter stops.

Volume was above average again. Breadth was poor.

But, hey, many of bargains of yesterday are cheaper today. That should make some value-seeking bulls excited.

Yesterday I said:

Market is oversold, but in a downtrend in a bear, sometimes, if not often, a lot of damage is done while oversold drags on. Stochastics are dipping below 20. In the DOW, the Stochastics have already got to 10. Had this been a single stock, I would call for an accelerated selling and capitulation to new lows to end this down leg.

Guess what. Market did what market should. It carried out its course of action in an orderly manner

I also said:

DOW is so close to November low, and this is an expiration week. In this market, billions can all of a sudden be summoned to the future markets to buy DOW or S&P futures – there are many loose billions floating the electronic banking systems nowadays. I will not be surprised if an all-out attempt is made to drag the index up into the gap that it opened on November 17.

The billions were a no show today. And Dow is till virtually where it was, and there still is a chance for the bulls to get a bounce and claim a successful retest.

My friend Bill Zimmer of prudenttrader.com quoted Bernard Baruch in his post today:

“The purpose of the stock market is to make fools of as many men as possible!”

How true! I think we have so far done a reasonable job of navigating this market. We have done it by paying attention to trusted technical measurs, and tuning out talking heads of financial media, bull, or bear.

But, there never is a time to be complacent.

Long term trend is down. Mid-term trend is down. Short-term trend is down. Resistance is 790. Support 768, and 750. And some positive divergences are building up.