Monday, September 15, 2008

The market is nearing an intermediate bottom

We are finally seeing true panic today. This is how intermediate bottoms are made. Just look at the put call levels. These kind of spikes are indicative of bottoms. This is just one of a myriad assortment of breadth and sentiment indicators that also spiked today. I'll explain in more detail in tonight's update.

I have to take note that the S&P is nearing the 50% Fibonacci retracement level. We may have a bit more downside tomorrow to push the market down to tag that line but the odds are now in favor of a relief rally soon. These levels of fear just can't be maintained forever.

Of course whenever we get a decline like today we start hearing the calls for a crash or it's 1929, 1987 all over again. While anything is possible it's not likely. Crashes come either in bull markets or at the very beginning of bear markets following a parabolic rally. They don't come after we've been mired in a bear market for almost a year and have already lost more than 20%.

Besides that I think its safe to say there is now very little doubt we are in a very left translated 4 year cycle. These left translated cycles don't crash. They slowly bleed you to death over the course of a couple of years. The next expected 4 year low is either summer or more likely the fall of 2010.

As I've been alluding to in the daily and weekly updates, I think there is a much better place to play the likely rally than the general market. Details in tonight's update.