Ending Soon: Stock Market Bear Market Rally

Trader Talk

Sellers jumped on board positive early action today, with the modest red ink going into the close for the major stock indexes run on lower volume than we experienced on Friday. The leadership profile remains negative, with 70 stocks making new highs versus 198 stocks making new lows.

The short term momentum oscillators have turned negative once again, confirming the bearish stance of the AlphaKing Trading Indicator. We have new trades below to add to our short exposure ahead of an expected move to new lows.

The overall pattern remains solidly bearish, with every sell-off running in five waves and every bounce in three, all absent any sign of a capitulation spike down and corresponding up-spike in fear for the VIX. The rally last week has offered a great opportunity to add to short positions, and that is exactly what we are doing at this juncture.

The action today that matters landed after hours, with American Express and Apple both falling hard post earnings releases, on the backs of news that signals a struggling consumer resulted in both lower retails sales and deteriorating credit quality. In short: consumers can't pay their bills, thus they can't be expected to buy retail luxuries such as I-Phones and Plasma TVs. The technical set-up argues very strongly for a smash below last week's lows for the stock indexes, and a bona-fide crash may very well develop from that position. Time to batten down the hatches...

Kevin Wilde, Chief Trading Strategist AlphaKing.com.

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