Another historic day and massive drop in the Dow. We had a 797 point range during the day! In the third primary leg of a bear market, I stated that this leg and any follow legs will exhibit the most erratic and volatile sessions of all. The reason is because we’re at a point where almost everyone just wants to liquidate, liquidate, liquidate. People aren’t selling just to sell, they’re trying to get back the money they planned to use for their kid’s college education, or maybe a new house, and for almost everyone, a steady retirement. Because of this threat, no one will be able to stop people from selling because it’s hard to change another person’s mind after they made their conclusion. Now, imagine the effect in the market brought by the millions of people who already reached that consensus. Welcome to the third leg.
We had about 7 new highs and 2,216 new lows made. This is greater than the 1,076 new lows made on Friday, double the number in a single day. This is evidence of the ferocity and destructive nature of bear markets that exceed 2 primary legs in length. One should not go long in this type of environment unless they are trading the reaction rallies; otherwise it is smarter to just stay in cash. One positive sign is that I do believe we hit capitulation today.
We had one clean breakout today, and people can’t really expect too many more on days like today or pretty much everyday of last week. Dendreon (
Just like my last few articles, there are too many breakdowns to profile, but I will cover the most disastrous ones here with only one purpose in mind: to educate. I have added comments and identified warning signs, common bearish patterns, and what to look out for to avoid having your stock profiled in my breakdown section in the future. If you have any questions regarding any of this, you can contact me. Technical identification and quick prevention are both critical in capital preservation.
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