Stock Market in Crash Position

Trader Talk

The short term momentum oscillators remain negative, confirming the bearish stance of the AlphaKing Trading indicator. The accumulation/distribution profile remains negative, confirmed with a bearish leadership profile, with Friday's close yielding 61 stocks making new 52 week highs versus 367 stocks making new 52 week lows.

The 4% rule remains bearish, while Federal Reserve policy remains bullish. The VXO volatility indicator closed the week at 29.3, showing yet another up-spike in fear. The primary Elliott wave count suggests the wave 3 of 3 meltdown run has begun. Waves 3s are the territory of stock market crashes of historical proportions.

Traditional seasonal trends have us looking for a difficult third quarter for the bulls, while the Presidential cycle remains bullish for the remainder of 2008. The Benner-Fibonacci cycle will remain bullish until 2010, though this prolonged time period may include one or more cyclical bear phases. The AlphaKing combination cycle sees a bear market slump running all the way into mid-December when the next major turn-date is slated to land.

Summary:

The technical action this week was flat-out horrible. The fundamental news was equally horrid, with Lehman Brothers and AIG both looking like they better get some hard cash soon or else face a bankruptcy filing. Hurricane Ike looks like a summer shower compared to this financial tsunami. The FED meet on Tuesday, but what can they do that they haven't already done or tried? There's not much to add this ghastly set-up, except to reiterate our belief that preservation of capital is an absolute must at this critical, treacherous, juncture.

Kevin Wilde, Chief Trading Strategist, AlphaKing.com

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