No bottom yet

The market continues its quest for price discovery. The Dow theory is alive providing a clear confirming signal that the bottom is nowhere in sight. Though still far from it's ultimate bottom, an interim bottom appears imminent. Patience will be a rewarding virtue for all would be knife catchers. Enough with the cliches and a look at some charts.

As predicted last week the market sell off has accelerated. These waterfall sell offs culminate in a capitulative spike that flushes all optimism. This purge of sellers will result in a new round of buying lifting the markets from their lows. Counter-trend rallies can be a fools game even when you know what to look for. The purpose of this weeks update is to remind readers we are not there yet.

DOW


Note from the chart that interim plunges are accentuated by a volume spike. These go hand and hand with higher than normal volume, first down then back up, That's the flush we await with AIG and GM fighting over who mans the handle.

GOLD

Gold has been acting predictably within it's trading band. While it hasn't completely tagged its trend line it did bounce nicely off the 50 DMA. Secondary indicators are mixed and I remain skeptical we won't test 900 again. Regardless risks for longs have diminished somewhat.