Stock Market in Crash Mode

The short term momentum oscillators remain negative, confirming the bearish stance of the AlphaKing Trading indicator. The accumulation/distribution profile remains negative, with zero high volume accumulation days to counter a slew of high volume distribution days. The leadership profile also remains very bearish, with 21 stocks making new 52 week highs versus 2,008 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 79, continuing the bull market for fear. Please note the high for this sentiment gauge is a whopping 172 during the 1987 crash, so while we remain at super-high levels, the fear spike may have a lot more to run. The primary Elliott wave count suggests a wave 5 of 3 meltdown run is in play, and should result in yet another crashing plunge in very short order.

Traditional seasonal trends have us looking for a rebound following a capitulation collapse in the 4th quarter, 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:

Oh, my, what another WOW! week. The news remains grim, and can be expected to remain grim. The internal count calls for more downside action, and more severe pain for the bulls. While they may be able to drag the next plunge out with more sideways action going forward, the odds of probability remain super high the bears will have their day in a big way in the non-too-distant future. Markets around the world broke through critical support on Friday, and the US indexes are hanging by a torn finger nail to their must-hold-at-all-cost technical lines in the sand levels. The remainder of the year should see the bulls enjoy a respite rebound at some point - once the capitulation plunge takes another pound of financial flesh - but those looking for an end-of-year rally to help save the day should think again, for the overall technical set-up suggests a great deal more bear misery should land before we hit any lasting bottom. When our indicators say to buy we will buy with both fists and then some. But first we get to see how the financial markets handle the next capitulation plunge.

Kevin Wilde, Chief Trading Strategist, AlphaKing.com

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