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Low Breakout Dow Jones

Not quite low break out yet, but I believe we probably need one to get this over and done with. Looking at our chart, it still has not fulfillled our Knockout Theory. This compressed spring has more to go. our 7155 long position got hit at $5/point. Whilst not convinced we have seen the worst, this falling knife continues to slice past all endeavours to catch it. We lower our other orders to open to $10/point at 6870 - which is unlikely to be reached tonight. The morphology of the chart suggest a further sharp drop to reach terminal velocity, then stabilize, and suffer further subsequent decay of 50-100 points. Perhaps a fall to 6950 sharply, then a more gradual decay to 6850 to complete the downward complex. At that level, all bulls should have died.



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Nothing terribly encouraging from McHugh today. Although his comments regarding the McClennan Oscillator are very interesting. I lighted up a bit on my longs today, as a bit of fear starts to set in. I guess that is a good thing


Most of our key trend-finder indicators remain on sell signals, and have been on sells for a couple of weeks. It would be premature to trade or invest ahead of these signals, especially when the signals are in the same direction as the primary trend. The market is finding it hard to catch a bid, but we continue to feel that the speed of this decline has been orderly enough to suggest and support that some sort of bounce is coming. It would not be a high probability trade to go long with the key trend-finder indicators still on sells, and even if they turn to buys, going long would be high risk given the expectation for wave (C ) down and the recent reconfirmation of the Dow Theory Sell Signal. A more conservative approach would be to use any rally to raise cash, to sell into. There is another phi mate turn date coming around the spring equinox, and the spring equinox has been famous for initiating major trends in stocks. Should the coming bounce be unimpressive, we should be prepared that the March phi mate turn could be the start of the coming cataclysmic decline we are expecting, wave (C ) down.




The market hates uncertainty, and there remains a ton of it coming from the Master Planners. Nationalization is a key problem for the markets. It is the greatest fantasy of most regulators to run a business that he/she has been relegated to merely supervise and examine. Nationalization is appealing to them, to prove they can do it better. Also a problem is the confusion between a $ 787 billion stimulus plan just being passed versus the objectives raised Monday about reducing the budget deficit, which means cutting spending, and talk of raising taxes.




Another key problem is cash is not getting into the hands of American Households. Credit has dried up, credit card companies cutting back lines, real estate sales frozen, bids lacking in financial markets, jobs being cut, salary and bonuses for those working being scaled back. Tax rebates are negligible, it will take years before the infrastructure spending in the stimulus plan creates jobs. Confidence that anyone is in charge who knows what will get us out of this mess, is lacking. Too many fraud, and bankruptcy, and bailout surprises day by day.




The Dow Industrials fell hard Monday, ending down 250.89 points Monday, closing at 7,114.78. It was the worst closing low since May 7th, 1997, 12 years ago. The S&P 500 hit new closing lows, the worst since 1997 as well, while the S&P 500 intraday low of 741.02 on November 21st held by a point. These figures are below the October 2002 bottoms, confirming this is a Grand Supercycle Degree Bear Market, far worse than the 2000 to 2002 Bear Market and the worst in over a century. It is not over.




If we are looking to glean some positive news from this market, volume was lower on Monday's decline, sharply below Friday's volume. NYSE volume was 109 percent of its 10 day average. Downside volume led at 80 percent, with declining issues leading at 86 percent, with downside points at 86 percent, not a 90 percent panic selling down day, which is a small plus. S&P 500 Demand Power fell 6 points to 365, while Supply Pressure rose 12 points to 451, telling us the decline was strong, however heavy, deep pockets intervention buying supported prices. The DP/SP indicator remains on a sell signal Monday.



Monday's McClellan Oscillator had the fourth worst reading EVER since our data bank started back in 1960, 49 years ago, negative -367.50. This places it in the top ten worst readings ever, all of which came at major bottoms. This suggests we may be at, or days away from a bottom that lasts a few weeks. The November 20th reading was -314.58 and was a major bottom that led to a 19 percent rally. The October 10th, 2008 reading was the worst ever at -415.18, with the day before, October 9th, 2008 reading the second worst ever, a bottom that led to an 800 point, 9 percent rally. The major bottom in July 2007 was started with a M.O. reading of negative -344.58, which led to an 800 point rally to an all-time high in the Industrials a few months later. The March 23rd, 2005 bottom occurred with an M.O. reading of -336.84, which led to a 500 point, 5 percent rally. The October 9th, 2002 low came with an M.O. reading of -248.13, while the July 23rd, 2002 low came at a M.O. reading of negative -315.56 that led to a 1,200 point rally. The September 21st, 2001 low had a negative -385.92 M.O. reading, the third worst ever, which led to a 900 point, 17 percent rally. The October 20th, 1987 bottom came with a McClellan Oscillator reading of negative -250.19, which was followed by a snapback rally.



We are expecting a low sometime soon, as we had a phi mate turn date ideally scheduled for Wednesday February 18th, 2009 which of course can occur +/- a few days of that date. It won't be the 18th, since today, Monday had a lower close. Today, Monday does qualify. We also are inside a Fibonacci Cluster turn window from last Friday, February 13th through today, February 23rd, +/- a day or so. Clearly this coming turn will be a bottom. It should lead to a multi-week rally, but perhaps from lower levels than we see now. This next rally could be the last chance to raise cash before a coming cataclysmic plunge, Supercycle degree wave (C ) down, which could get started as soon as this spring. We are also concerned it may be a truncated wave C up of (B ) up rally that is coming, as markets remain extremely weak. If so, this would mean wave C of (B)'s top will fail to exceed A of (B)'s top on January 2nd, 2009. Truncated waves usually mean markets are so heavy, that they can't wait to decline hard.



Think about this. GE is selling at 9 bucks a share. It used to be, if a stock sold below ten bucks a share, it got tossed from the Dow Industrials 30 average. Can you imagine General Electric getting tossed from the DJIA? Amazing what is going on at this time.




There may be declining Bullish Wedges forming in the S&P 500 and Industrials, shown in the charts on page 11 and 12. If so, those patterns are nearing completion.



The Industrial's and S&P 500's weekly Full Stochastics remain on a sell signal, at extreme oversold levels. The Daily Full Stochastics are bottoming. The 30 and 15 minute Full Stochastics suggested we could see prices fall early Tuesday, then rally. Given the timing of our imminent phi mate turn date, and the apparent near completion of patterns for wave B down, as terminating wedges finish, it is quite possible wave C-up is very close to starting.




We show a very short-term chart of the S&P 500 in tonight's report at www.technicalindicatorindex.com , annotating the short-term EW labeling. It is possible a bottom arrived Monday, as we see a complete, or nearly complete three waves, a-b-c down for wave E. A decisive rise above 7,500 argues the decline is over and wave C-up has started.




The Demand Power/Supply Pressure indicators remain on an enter short position signal Monday. Monday's McClellan Oscillator fell to negative -367.50, an extreme oversold level. The Summation Index fell to positive + 86.87. NYSE New Highs remained anemic at 2, with New Lows improving to 395, a minor Bullish divergence, in what looks like selling capitulation over the past two days. Now for those of you expecting a crash over the next few weeks, consider this: When the Industrials fell to 7,552 on November 20th, new lows reached 1,894. Monday's new lows were a far cry from that, only 395, with prices even lower, closing at 7,114.78.




The percent of DJIA stocks above their 30 day moving average fell to an extreme oversold 0.00 from 3.33. The percent above 10 day fell to 3.33 from 6.67. The percent above 5 day fell to an extreme oversold 0.00 from 10.00. The NYSE 10 day average Advance/Decline Line Indicator worsened to negative -1153.1, an oversold level, close to the negative -1328.2 at November 20th's low, remaining on a "sell" signal from February 11th, needing to rise above the positive + 120.00 threshold necessary for a new "buy."



Our three Blue Chip key trend-finder indicators (other than the Demand Power/Supply Pressure Indicator) remain on a "sell" signal Monday. The Plunge Protection Team Risk Indicator fell to positive + 5.38 Monday, February 23rd, remaining on a sell signal from February 2nd, 2009. A rise above positive + 20.0 or a drop below negative -16.0 triggers a new "buy" signal.

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Owners of capital will stimulate the working class

> to buy more and more

> expensive goods, houses and technology, pushing them to

> take more and more

> expensive credits, until their debt becomes unbearable. The

> unpaid debt

> will lead to bankruptcy of banks, which will have to be

> nationalized and

> the State will have to take the road which will eventually

> lead to

> Communism.ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ÂÂ

> - Karl Marx, Das Kapital 1867



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Hi Dan,


I cashed out around 80% of my holdings today.


Decided I will wait until the next down wave is over. Think it is coming faster than most of the commentators believe.


Complete lack of confidence and US markets on the edge. The economic conditions are unprecedented and I can't see any sustained rally in the short term. US market has broken Nov 08 lows and God only knows what will stop it in the near term.

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