When and What to Do Next – DJIA & SPX

Wednesday Jan 13^th was a wild session for US equities and many great trading opportunities are about to take place in various indexes, sectors and commodities.

Let me share with you two intraday updates I sent to subscribers during the trading session so you can get a feel for how technical analysis can assist us in timing and trading the market.

1:35PM ET Wed Jan 13 – Where Will the Market Bottom: Update

This week is a time of transition for the stock market. As discussed in great detail last couple of days we expect choppy price action and a potential low to form. I have my sights set on a bottom to form Thursday or Friday with a huge wave of panic selling in the market. This wave of fear should mark critical pivot point in the market for a bounce/rally for a week or three.

The price action on the DOW is very bearish with inside trading days which point to a breakdown today or tomorrow for one final washout low and test of critical support as shown on the chart below. 

3:14PM ET Wed Jan 13 – Before the Close Update

About an hour ago I talked about how the market was on the verge of a drop and how fear and panic selling should hit the market later today or tomorrow. Well here we are, my DIA example I showed earlier today has already dropped $2 per share, and panic selling has spiked above my critical pivot reading of 9 shares being sold to each 1 being bought (Current reading is now 11 and still climbing!). This is the sign of a washout low and tomorrow I figure a bottom will be put in place for a bounce right on queue before the holiday on Friday.

This fear has people starting to move money back into gold, silver and miners a little this afternoon, and bond are moving up in a big way also.

What Do You Do Next? – Conclusion:

I can’t say it enough that the US equities market is almost in a full blown bear market. In fact I wrote a book specifically on this earlier this year to help warn investors of the market crash that is starting to take place right before our very own eyes.

What you must be aware of now though with your trading is that the game has changed. Buying into oversold markets and dips will not work well any longer. Sure there will be some rip your face of “V” reversal bounces, that is one thing we do see over and over again during bear markets, but they are very tough to time and trade.

What I want you to pull from my analysis here is that a bounce should occur and I expect it to last for a week at minimum. But it’s not the type of trade you want to bet a lot of money on. Conversely, once we get the bounce the better play will be to buy an inverse ETF when the buying momentum stalls. I looked to the short term time cycles to top and more importantly see bearish topping price patterns along with my Greed Buying Indicator that helps time market tops. It’s the inverse indicator to my Fear/Panic indicator on the chart above.

Chris Vermeulen – www.TheGoldAndOilGuy.com