Bear Growls, Lehman Looms

Trader Talk

The major stock indexes took it on the chin once again as important support of the 50 day MAs were breached. Volume was once again heavy.

Officially, the NASDAQ fell 2.6% on 2.6 billion shares, while the Dow Industrials dropped 2.4% on NYSE volume of 7.3 billion shares. The leadership profile remains negative, with 103 stocks making new highs versus 575 stocks making new lows.

The short term momentum oscillators remain negative, confirming the bearish stance of the AlphaKing Trading Indicator. We have new trades below.

The technical evidence continues to mount that the next leg of the bear market is underway. Since this one should be an Elliott Wave 3 of 3, we should expect the crash set-up pattern to unfold over the next couple of weeks. The financial sector remains the primary problem for the markets as they simply cannot attract money into their businesses to cover ever-increasing losses in their leveraged debt speculations gone wrong. No money to counter big losses means bankruptcy. Lehman appears to be the next to go, to follow on from Fannie, Freddie, and Bear Stearns.

Many more should follow, with any domino follow-through effect that accelerates providing the fundamental back-drop of a bona-fide stock market crash that the Elliott Wave count says now is in play. The volatility this year has brutal to both bulls and the bears, though we've seen nothing yet, when matched against what is fast heading our way.

Kevin Wilde, Chief Trading Strategist AlphaKing.com.

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