Jack's Wrap - Failure...

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What other word other than failure! Two days of nice action above the 20's and those daily charts still looking very solid. This action was the last thing I would have expected to be totally honest. Shows you how nasty this bear is. Even the most powerful buy signal lasted only 7 trading days. I though a test of the 50's were in the bag. Wrong! Everything was set up for that event. Strong daily's. Strong advance decline lines during the rally with very decent volume. Strong advance to decline up to down volume. No matter what you looked at. The biggest and best being that vix terminal pattern. It is bouncing off its 50 day moving average and maybe a retest of its 20's will stop it but you can't argue with a stock market that couldn't hold its own 20's after just two days above. No excuses. Again, the bear being what it is and not offering the usual events that most normal markets do. In fact, what most bears do. The bear market of 2000 offered many visits up to the 50 day moving averages from below. Not this one. In 13 months not a single visit. Unheard of. Again, it was set up to do so but this bear being different, it didn't allow. We fell from the start of trading and after a brief run up watched the markets fall throughout the day. It accelerated as the day moved on and when all was said and done, a lot of technical damage had taken place.

If this market continues to fall it will set a strong positive divergence at the bottom that sets up one of two scenarios. The first one the bulls will like the second one the bears will fall all over themselves with glee. That positive divergence will set up a final bottom the bulls can buy heavily for many months worth of up side. All weakness can be bought. That's possibility number one. Possibility number two is we still bounce off the positive divergence but form a triangle that sets up another long leg breakdown that takes the market to yet new lows. Ugly but a real possibility. We need to prepare for this possibility because it has a 50/50 chance at least of becoming a reality. The triangle scenario is what has been taking place in this market for 13 months now. Each one spins and then breaks to the down side over time. The triangle's can bring you in and play with your emotions. You think things look alright but then quite suddenly things break down. Best to be cash when you see that taking place and hen get short on the breakdown. That whole scenario has a long ways to go regarding time before that plays out. It's just a road map. Today's action sets this up and is a huge red flag for the future. Beware of this please. I will walk us through it if it starts to set up. Again, that's down the road.

When the vix put in its terminal pattern we called a bottom in the market and started going long. It worked out very well. We had seven straight wining plays, many of them quite large. We stayed too long thinking the 50's were on deck based on everything we saw. It was not meant to be and took two hard losses. Overall, once the buy signal hit, we did great. Not having the last two losers would have been best but this market is too tough to expect perfection. The key is to outperform and make money and we have done that. If anyone is expecting more than that then your expectations are unreal. We will thus continue with our safety first approach and spend more time in cash and when plays go out, only a few at a time maximum. For now the environment remains incredibly difficult for everyone.

The 20's are now gone. stocks like Goog, Aapl and Gs continue their overall horrific behavior. Price destruction globally once again annihilated the commodity stocks. Remember, those stocks will NEVER  get back to their old levels. The financial's cratered and after hours, a desperate WFC, considered the best by many, said they need to raise money and are doing a secondary and that's bad news for the market. Markets just hate those as it shows fear from the company that things are falling apart rapidly. Remember too that they just got a huge chunk of money from the fed and still need to do a secondary tonight. How bad does this mean the global environment really is? FAr worse than we all understand for sure. With news like that from Wfc and with action from stocks like those mentioned above, this is not good news overall.

I am not saying the market is just going to crash out. But look at C, another beneficiary of the fed's injection of capital, and it makes you wonder who else is going down. C was crushed today and the list goes on and on. The bear is still very much alive but again, based on those daily Macd's, we're unlikely to just fall off the face of the earth. We can fall then bounce and then triangle out back and forth just to make life more miserable for the masses. Let's take this as it comes. We can do a short or a long here and there but absolutely nothing aggressive. As long as the bear market lives we must play with extreme caution. Capital preservation is our number one priority.

Peace

Jack

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