No, Stocks Haven't Hit Bottom Yet!

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Trader Talk
The short term momentum oscillators remain negative, confirming the bearish stance of the AlphaKing Trading indicator. The accumulation/distribution profile remains negative, with no high volume follow-through advances to confirm any of the big up days since the crash landed last month. The leadership profile also remains very bearish, with 10 stocks making new 52 week highs versus 503 stocks making new 52 week lows.

The 4% rule remains negative, while Federal Reserve policy remains positive. The VXO volatility indicator closed the week at 70.3, starting a new spike up in fear. The primary Elliott wave count suggests a wave 5 meltdown remains underway, with yesterday's pop a minor wave ii of an expected 5 wave move below the October 10 crashing lows.

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:

Look, there is going to be one helluva rally coming out of all this churn, but our technical works says we have to suffer one last clean-out crash before this monster rally lands. We have experienced many one-day-wonder false starts to this expected advance since this bear started, and the failure of these rally pops is testament to the internal technical weakness that suggests very strongly that the October 10 lows are not the technical lines in the sand from which a more lasting bull surge will emerge. Indeed, the on-going five wave mega plunges, followed by big - though lesser - three wave partial recoveries, suggest the bulls are fast running out of time before the next killer clean-out plunge lands. Focusing in on the move above the 20 day moving averages (gold line) in the charts below that landed a week of so ago, we can see the peak as a head of a head and shoulders top, with the recent move back (yesterday and today) to retest the 20 day MAs as part, or whole, of the right shoulder. That puts yesterday's low, and the October 10 lows, as the neckline where raw capitulation resides. We've seen this movie before, and it doesn't end well for the bulls who see yesterday's bounce as the end of their misery. What really happened yesterday was the stock market landed on the mortician's table only to croak a barely audible: "I'm not dead yet." Now the mortician is a tad deaf, and the starting the bone saw doesn't help, so our advice is you better be ready for some terror and horror to come as we get to see exactly what the bulls are made of...

Have a nice weekend.

Kevin Wilde, Chief Trading Strategist, AlphaKing.com

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

Day 3 of Market Correction

Trader Talk

The major stock indexes fell hard once again today on on-going weakness in the housing sector, along with higher than expected inflation, doing nothing to ease trader jitters. Volume was a tad higher than yesterday.

Officially, the NASDAQ fell 1.1% on 1.8 billion shares, while the Dow Industrials dropped 1.1% on NYSE volume of 4.2 billion shares. The leadership profile remains negative, with 42 stocks making new highs versus 286 stocks making new lows.

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

The relatively low level of stocks making new lows, along with reasonably benign volume on down-days, suggest the current stock market weakness is a normal corrective pullback within an on-going up-trend. We are getting close to levels where the buyers would be expected to step forward, and day four on one-way moves often provide great turning points. Today was day three of the recent selling pressure. The big question with entry trades on day four is whether the low lands at the open, or at the close. Both work well in testing. Our plan is to shoot for the close as being the low, and thus we'll wait till tomorrow's update to switch the unleveraged QQQQ long trade for the Index portfolio to the leveraged QQQQ long one (QLD.)

Kevin Wilde, Chief Trading Strategist AlphaKing.com.

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

Still a Bear Market

Trader Talk

The major stock indexes were down 2% yesterday so of course today they were up a similar amount, with such volatility no doubt good for the business of anti-stomach ulcer drug makers. Officially, the NASDAQ advanced 2.5% on 2.3 billion shares, while the Dow Industrials rose 2.4% on NYSE volume of 5.4 billion shares. The leadership profile remains negative, with 80 stocks making new highs versus 233 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. As trend followers we do not need to be able to predict the markets to make money, and certainly no one can predict stock market turns and trends with any high degree of success over the long term. With that said, here's what we believe to be the higher probability plays going forward. The first is based on Elliott Wave and our experience of the breakdown/pullback historical pattern of expectation. That says since the S&P500 fell in five clear waves over four days prior to today's bounce, and today the S&P500 shows a Fibonacci 50% recovery of points lost during the prior slide, what should follow very soon is a continuation of the collapse, all as part of something very bad indeed for those long the market.

The second most likely outcome is based on our experience of technical analysis, which says those 50 day MAs shown in the charts below look mightly enticing to the bulls, and it wouldn't be a major surprise to see those technical-lines-in-the-sand be the final resting place for this counter-trend advance within an on-going bear market. We have seen no sign yet that the stock market wants to flip to bull mode, and we remain very cautious until the investment ducks start to turn for real. The next down move should be much more scary than we have seen so far during this bear, and we believe strongly that it remains a question of when the next down-leg of bear starts, rather than if.

Kevin Wilde, Chief Trading Strategist AlphaKing.com.

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

Ugly After-Hours Session for the QQQQ

The major stock indexes zig-zagged higher today, the NASDAQ gaining 1.2% on 2.6
billion shares as the Dow Industrials rose 1.85% on 7.3 billion. The Leadership
profile is bearish, but the new lows list has contracted dramatically in this 3-day
rally, today posting 89 new highs and 271 new lows.

The short term momentum oscillators have turned positive, contradicting the bearish
stance of the AlphaKing Trading Indicator. We have no new trades at this time.

It sure looks like the SEC has put the fear of God into the naked short-sellers
who had really piled into financial and homebuilding stocks to record highs. Monday
July 21 is judgment day, the start of the new enforcement of an old rule. Traders
do not want to worry about scrambling to find shares to borrow by the settlement
dates. The stock indexes continue to map out in near-perfect bear market pattern,
and with many big earnings releases after the close today - GOOG, MSFT, IBM - and
the reactions to them after hours, the Nasdaq 100 etf fell hard to below its
lowest trade of the regular session. Things don't look rosy for the bulls here,
and we eagerly anticipate Monday's trade in the dreary homebuilding and financial
stocks.

Chief Trading Strategist Kevin Wilde returns from vacation next week.
For Free charts with trading signals and fundamentals ratings, visit AlphaKing