STILL GETTING BOUNCEBACKS VIA FEELER

Make a lot of room please (at least 150MB+), so I don't have to re-send stuff to individual people. Attachments from e-mails that have already been sent can be saved on your computer and the e-mail can be deleted, thus freeing up space. I'll give the group one more day. The files will be sent over the span of several days/weeks. Thanks!

TODAY'S ACTION

Another last-hour WTF moment…great. Just when you’re about to wrap things up, a power rally shows up busting through the door at the end of the day. I’ve been in cash the whole day (still am), so it didn’t make any difference to me. The action at the end of the day brings the SPX close to the 50% retracement level, or the halfway point between range support and range resistance located between 855 and 920.

The SPX also closed above the 50-day MA, but it must maintain itself above the 50-day by not breaking down during a consolidation period like it did mid-December. At this point, we need to see a solid breakout above 920 SPX. Keep in mind that we do have major overhead resistance.

I stepped back and looked at the 4-month chart for a while and noticed that we formed a “Pipe Bottom”. These formations don’t occur as frequently as flags or wedges, but they are highly reliable. A pipe bottom is formed when there are two large spikes right next to each other after an extended decline. In addition, the volume must be high on either one or both of the pipes.

Statistics show that bear market pipe bottoms have a 4% failure rate and an average gain (rally) of +32% which makes this a highly-reliable pattern (as we can already see). 23% of these formations have gained in excess of 50%. This is one of the few patterns that are confirmed “after the fact”, however, the point is not to say “duh”, but to get some sort of price target.

What’s interesting is that we also formed a seagull pattern. This pipe smoking seagull is about to get HIGH. Keep in mind that this is a “short-term” bullish reversal, which means that it will most likely be a temporary fix and we will test the 750 lows. It is unlikely that this is the THE bottom like many have been calling recently. However, it doesn’t hurt to partake in the rally until a good shorting opportunity presents itself.

We still need some confirmation because the holiday volume just doesn’t confirm any type of price action when more than half the players aren’t even participating.

Here are the details:

SPX 10-day

SPX 40-day

SPX 4-month

For more on the Pipe Bottom, read Bulkowski's 964-page Encyclopedia of Chart Patterns.

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

TODAY'S ACTION

We are still in the range that is bound by 1) the 20-day MA @877, 2) the 30-day MA @863, 3) 855 support which doesn't seem to be cracking, and 4) the LH trend line ending at 870 (sky blue 35-day chart). All of these areas are boxing in the market within a tight and narrow range, a 'pattern' that hasn't been seen in months. However, this doesn't mean that there won't be any more volatility.

Today's action showed the strength of the 855 support level. At this point, the 50-day MA is now at the half-way point between 855 and 920. We'll have to break out of #1, #2, and #4 (above). Can any of this action be trusted? No. The holiday volume is so light that anyone with big money can actually bully around stocks all day long. We will get full participation only after New Year's.

It seems like only safe way to determine a breakout or breakdown is to wait until 3:57PM when you know for a fact that the market will close up or down +/- X, and then place your orders. What happened in the last few minutes yesterday showed that the "WTF" still lives and isn't going anywhere anytime soon. I am personally betting more toward the short side as of today).

Looking at the long-term, we could be in the eye of a Category 5 hurricane. The light winds and clear skies don't seem to bother people much because most people got the shit kicked out of them when the hurricane approached early this year. Looking at the previous reference point of the 2001-2002 crash, we may be in the eye for several months a.k.a. "dead money" for long-term investors. What will be true is that 2009 will once again be a year full of trading, instead of buying and holding. All we can do is make assumptions based on the past, unless you have a time machine.

For now, we just have to get out of this range. I wonder what the catalyst will be...

SPX 1-day

SPX 3-day

SPX 5-day

SPX 10-day

SPX 35-day

SPX 4-month

OK, first, let me sat that the market may NOT match 2002's bottoming process. Who knows what will happen. Just use this as a reference, not some kind of "sure thing".

2002-2003

2008

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

SUBSCRIBERS & STUDENTS

I am getting bounce backs because some of your e-mail accounts are over quota. Try to make some room in the e-mail account or even create a new temporary e-mail address. I have another 100MB+ worth of additional files that I will send, but I can't do that if I'm getting the 'over-the-limit' errors. These are your Christmas presents.

I have sent 21 batches so far. I'll continue on Sunday. If you created a new e-mail account just to collect the files, let me know by then. If I get an error from someone, I'll have to stop sending them again. If you don't want thousands of dollars worth of stuff for free, then something is seriously wrong with you. Let me know and I'll remove you from my "nice" list and put you on the "naughty" one.