Just got back…

This is what I have drafted from before I left this evening.  I will fill it in tomorrow.  My apologies, as my plans went far longer than I had anticipated.

BOTTOM LINE:  More decline in the very short future.  At some point a bounce will form, but we don’t think it will be without another low (or so).

We continue to head lower, producing low after low.  The $VIX is on the rise, and continues to poke around nearly record levels, even the people say it is high.  Sentiment indicators continue to fall and are still pointing down.  Doesn’t this SOUND like a wave 3.  For the most part, it hasn’t FELT like a wave 3 until this week, so I don’t think we are done falling yet.

However, the question on EVERYONE’s mind is “what about the bounce?”  Well, what bounce?  When the media gets ahold of a story, it is hard not to get away from it, especially in a time like this.  But this is when we need to step back from the tube and make sure we trade the entries on the charts.

That said, let me explain a little about being oversold (or overbought).  Some of the indicators you might be looking at right now are most likely in oversold territory.  Some of them are even pushing the extremes of range.  Indicators/Osciallators can remain overbought/sold for a very long time.  A few of the things you should look for before taking a position against the trend, no matter how SURE you are about it, are direction, level, and divergence, no matter what timeframe.

This is the $NDX.  Notice how the MACD, while very low, is still pointing down, as well as being at a new relative low.  That means that trend is still strongly down.  The stochastics tell a different story, being slightly divergent.  Not to say it is done, but only that we should watch for momentum to build on the upside before jumping in.

Again, I will fill in tomorrow, but it is late on the East Coast, and I need to grab some Zzzzzs.

Skål!