We are seeing things that by all rights we should never see. First off we are getting a waterfall decline after the market had already fallen over 20%. Waterfall declines almost always come at the beginning of declines. Typically as a bull market dies or at the end of a very right translated four year cycle. We do see bear markets produce from time to time a 20 under the 200 scenario. Rarely do they move down with the viciousness that we've just witnessed though and they tend to bounce back quickly.
I've noted in the past that waterfall declines often have a midpoint consolidation before the final leg down. So far we've not seen anything that resembles a midpoint consolidation.
I certainly hope I'm wrong, but what if we are forming that midpoint consolidation right now? If we are and it breaks down it would suggest a final low in the 450-500 range for the S&P.
I think at this point we should probably just watch the credit markets and forget about the stock market. Until the credit markets show significant signs of recovery it's going to be tough to put together a lasting rally.
So far they have not responded to anything the powers that be have tried.
We are going to need to see the dollar break also. A rising dollar is telling us deflation is still in control.