STAGES OF A BEAR MARKET - SIMPLIFIED

GREAT CRASHES IN HISTORY

Here are just a few, I'm working on the others...

Every crash is different, yet they're all the same. You know what I mean?

Close-up of the Great Crash...

I must have miss this one...

The Nikkei 1990's Crash

The 1987 Crash

The NASDAQ Crash

And last but not least...

The Crash of 2008!!!!

Don't forget to try out the Free Trend Analysis. It's FREE, so give it a shot!

YOU THINK YOU HAD IT ROUGH THIS WEEK?

So did the Pros...(click to enlarge)
WARNING: May bring a feeling of sadness

Or you might be pissed off...
(an oldie, but a goodie)

Don't End Up Like This! Let Me Help You!

TRYING TO FIND A BOUNCE? HERE'S WHAT YOU NEED TO KNOW

Another historic day to cap off another historic week. The last time we declined 8 days in a row were the days following Sept. 11, 2001. The DJIA lost 18.2% this week. The DJIA had a 1,018.77 point range and the S&P 500 had a 96.56 point range. Today marked the 1-year anniversary of the DJIA’s all-time high of 14,164.53. We are now down over 40% since that peak.

Today, the markets gapped down and dropped 7%, and it only took 7 minutes for the market to make a rebound to fill the opening gap. This was the largest morning gap down I’ve ever seen in a U.S. index. The volume level in the first hour was amazing and heavy and the volume in the last hour was equally amazing and heavy.

S&P 500 – 1 Day

Whenever the market hits a low in the morning that low is your first support level. I am pleased that the market held its low and made a higher low and broke out in the last hour. At around 10:30AM, one could see that the rally was weakening and the market was forming a bearish flag (which broke down). In the longer short-term picture, the market formed a descending triangle drifting lower throughout the day. The important key here is that we held our lows. The breakout occurred at around 3:00PM and the rally held onto most of its ground. The last 20 minutes represent current consolidation. It’s a positive thing that we closed down -128 points. Remember when a 100 point move was considered big and crazy? It’s peanuts now.

S&P 500 – 3 Day

The next three 6-month charts show several important technical aspects of today’s action. With the exception of the NASDAQ (the best performer), both the DJIA and SPX formed doji on massive volume. The doji are long-legged, signifying extreme indecision (confirmed by the 1,000 point range in the DJIA). Notice how volume it “back to normal” levels. We actually hit record volume today on the NASDAQ and SPX.

Next, notice the Bollinger bands. With the exception of the NASDAQ, today was the only day where a day gapped down so far that it opened below the lower band. Not only that, the day closed completely below the lower band as well.

Given the band width’s extremes, the massive record-setting volume, and the long-legged doji, I believe we are where we need to be to cal la bottom. I have started entering longs today. Since a bottom is tricky, it’s smart to gradually scale in positions instead of shooting your whole wad in the market all at once.

Below, the VIX set more records today by hitting a high of 76.94! Incredibly, this is the highest reading since the inception of the indicator, a testament to the true extent of our problems. As the market rallied, the VIX came off its highs and closed at 69.95. Although the day’s pattern is not considered a long-legged doji, the candle is a high-wave stick signifying major confusion. A single pattern isn’t as reliable for predicting a reversal, but 2 or more increase the odds. What I am looking for on Monday in the VIX:

1) The present pattern may be enough to start a reversal, but the signal is not clear

2) Bearish gap up, fade throughout the day to close well below it’s open

3) Doji, preferably long-legged

4) Bearish engulfing

The last three patterns put the odds of a major reversal close to 100%.

VIX – 1 Day

Don't forget to try out the Free Trend Analysis. It's FREE, so give it a shot!

HOW TO TRADE POWER SPIKES

Today is one of my favorite days, not because it’s the end of the worst week in market history, but because the end-of-day rally created so many trading opportunities for next week (yes, can you believe it?). I’m talking about trading power spikes, one of my favorite patterns. A stock exhibiting a power spike is one that displays an immediate and forceful change in sentiment from the previous day. Whatever the reason, traders instantly changed their minds on the direction of the stock…a very powerful signal indeed.

There are basically two ways to trade spikes, but first, the strategy:

1) If a stock that spiked the previous day looks like it will gap up in today’s session, then the buying momentum is highly likely to be maintained throughout the day or allow you enough margin to set a stop in case of an intra-day sell off.

2) If a stock that spiked the previous day looks like it will gap down in today’s session, then the selling momentum is highly likely to be maintained throughout the day or allow you enough margin to set a stop in case of an intra-day rally.

Ever notice how sometimes a stock that spike can go on for 3-5 days straight, producing gains of 20, 40, 60% in a matter of a week? But, have you also noticed that a “spiker” could gap down and end the day down 20, 40, 60%? In most cases, not all, the consensus at the open will determine the day’s direction. I repeat, in most cases, not all. I will also add that, if done incorrectly, the losses can be devastating.

Take a look at VeraSun Energy Corp. (VSE). This is a stock I recently shorted using my method #2.

Guidelines:

1) How long do you hold a short? Until there’s a up day where the open and close cancels out the previous day’s open and close. This is a candle of equal or greater length than the previous day.

2) Add a stop. You never know what will happen.

3) For stocks exhibiting #1 where the stock continues to go up, up, and away, then there will be a day where it will form a bearish gap up, doji, or bearish engulfing pattern, all three of which are prominent reversal patterns. At that moment, if you miss the move up, you can short the move down. Also at this moment is for you longs to get the heck out. Don’t hang around when there aren’t any buyers left.

4) Spikers are unstable and many will fail. Stocks that rise too quickly in a very short period of time will reverse quickly and end up close to where they started.

5) Spikers will meet resistance and make a successful or failed tests just like regular patterns.

These trades typically yield an average of 15-30% per pop and the average holding period is 3-5 days. You can do the math and see why they’re one of my favorite patterns.

Here are 20 spikers to pay attention to on Monday and beyond (plenty to go around). Don’t forget, if any continue to the upside in force, short on the reversal day to capture the stock on the way down. Either way, you’ll make money regardless of what the market is doing.

Don't forget to try out the Free Trend Analysis. It's FREE, so give it a shot!

TODAY'S BREAKOUTS & BREAKDOWNS (10-10)

There were 22 new highs and 4,340 new lows made. We had no breakouts and we had hundreds of breakdowns. If this keeps up, I’m going to have to change the title of my articles to ‘Today’s Breakdowns’. That’s it. No point in having the word ‘breakout’.

I’ll do a separate article on today’s market action and what can be expected as early as Monday. I think we have a good thing going in terms of the technical signals that I see.

Here are breakdowns with comments for future reference. Since the vast majority of stocks are already in free fall, be aware of these patterns in the future because they are all the same.

Don't forget to try out the Free Trend Analysis. It's FREE, so give it a shot!

VIX UPDATE

We're making history all over the place, and that includes the VIX as well. Notice at around 2PM, the VIX broke out of all-time resistance and proceeded to spike, hitting a high of 64.92. The amount of fear is incredible and will remain elevated for sometime. Given the global situation and the unknown duration of this crisis, I'm not sure if the VIX will ever see 30 or below again unless the crisis shows signs of subsiding. This will not happen anytime soon so expect the VIX to remain at elevated levels.

VIX - 1-day

I profiled the VIX while it was in it's only consolidation level in 5 years. The next day, the VIX broke out 30%+. The short-term end to this spike will be signaled by either 1) a bearish gap up, 2) a large bearish engulfing pattern, or 3) a doji top (presumably long-legged). This will also mark the short-term, capitulated bottom in the stock market.

VIX - Year-to-Date

Notice how we've made all-time highs since the VIX was created. We've exceed fear levels in every major market crash/economic crisis. This just shows you how scared people are...and they have every right to be.

VIX - Since Inception

Don't forget to try out the Free Trend Analysis. It's FREE, so give it a shot!

WALL STREET PRANK

The only 2 non-pissed off people that day..

CITI BACKS OUT, WELLS FARGO TAKES WB

Don't forget to try out the Free Trend Analysis. It's FREE, so give it a shot!