WILD ACTION AND THE PRE MARKET

After 4,268 DOW points to the downside, the market finally got its counter trend rally. Too many are excited because of how big the day was. We hate to throw cold water but:

“BEAR MARKET RALLIES ARE SHARP, QUICK, MAKE YOU FEEL GOOD, SUCK YOU IN AND BURY YOU SOON AFTER!” We coined this phrase. We already had a 2,100 point rally and a 1,700 point rally during this bearish phase. Both failed miserably. Bear market rallies serve to relieve massive oversold conditions. As we told you, we were very stretched combined with a large dose of bearishness…thus the rally. Let us also not forget that we are in not only end of month but end of quarter and end of year window dressing. Of course, window dressing is illegal so it doesn’t happen.

But forget all that. What worries us most this morning? Europe has had no reaction to our 1,000 point move. In fact, just the opposite as the DAX, CAC and LONDON FTSE are in new yearly lows this morning with decent sized losses.

Futures are down decently this morning…about 300 DOW points as we write this. We are not paying much attention to that. With price still so stretched and extended to the downside, we suspect we are going to continue to get some wild action both up and down. Gaps and reversals, reversals and gaps will be the norm for now. Eventually, it will settle down.