3 Waves Up, 5 Waves Down

Trader Talk

The action today was the exact opposite of yesterday where a rally was followed by a sell-off, which was followed by a late-day surge, while today we saw a drop at the open, a rally intra-day, followed by a late-day plunge. Volume was on par with yesterday.

Officially, the NASDAQ fell 0.2% on 2.4 billion shares, while the Dow Industrials dropped 1.8% on NYSE volume of 5.4 billion shares. The leadership profile remains negative, with 103 stocks making new highs versus 225 stocks making new lows.

The short term momentum oscillators remain negative, confirming the bearish stance of the AlphaKing Trading Indicator. We have no new trades at this time.

The overall pattern remains solidly bearish, with the downward stair-step pattern of lower lows and lower highs remaining intact. So too continues the bearish trend of five wave sell-offs followed by three-wave partial recovery bounces. Today's action looks like a five wave down move followed by three-waves up topping action. If so, it should be all downhill from here. The economic news showed weaker than expected GDP growth, and weaker than expected unemployment numbers.

The Big Kahuna of the latter lands prior to the open tomorrow, and could be the last straw that opens the selling flood-gates to confirm the super-bearish potential of the Elliott Wave set-up. As trend-followers with major skin in the game, we look forward to the next stock market buy signal, though so far there appears to be little in the way of hope for such bullish nirvana. When that changes we will gladly change our stance from bear to bull. Till then, watch out below....

Kevin Wilde, Chief Trading Strategist AlphaKing.com.

For Free charts with trading signals and fundamentals ratings, visit AlphaKing

Expect More Stock Market Selling Next

Trader Talk

The major stock indexes took it on the chin once again today as news on housing and car sales slapped traders awake to the reality the economy is fast headed toward a recessionary day of reckoning.

Officially, the NASDAQ fell 2% on 2.6% billion shares, while the Dow Industrials dropped 2.4% on NYSE volume of 6 billion shares. The leadership profile remains negative, with 89 stocks making new highs versus 245 stocks making new lows.

The short term momentum oscillators remain negative, confirming the bearish stance of the AlphaKing Trading Indicator. We have no new trades at this time.

The overall pattern remains solidly bearish, with the downward stair-step pattern of lower lows and lower highs remaining intact. The economic news remains grim, as both home sales and home prices continue to plummet. Ford Motor Co. also came out with news they are burning through $1 billion each month as sales of SUVs and trucks continue to collapse. That puts the American car manufacturing icon in jeopardy of running out of money as early as next year.

Technically, we are open to the possibility that the bounce off last week's near-crashing lows has further to run to the upside, especially since counter-trend corrective moves usually come in a three-step format. Thus yesterday's high may very be the first of that three, with the pullback today potentially part of the middle second, before a continuation of the rally would be expected to land to complete the entire corrective move within an on-going bear market. However, an outright crash going forward is not out of the question. Either way we expect a continuation and acceleration of the red ink over the next few days - at least - and we will evaluate the internal technical action for signs of which path is the more likely going forward, adjusting our portfolios accordingly. Such volatility is what bear markets are all about.

Kevin Wilde, Chief Trading Strategist AlphaKing.com.

For Free charts with trading signals and fundamentals ratings, visit AlphaKing