If you were one of those that thought the market has bottomed and you have participated in those recent fake 600 & 900 points rallies when the DJIA went near the 8000 mark, then today's new low might have been a surprise to you. But, if you have been listening to the market or have been following this blog and read my 11/12/2008 post or the 10/25/2008 post, then you would have been expecting today's new low.
Well, no need to dwell on the past. The new low is here. The question to ask now is "did the market bottomed today?" My answer is a resounding no. Today's low is a fully confirmed low. All the indices made new low along with the DJIA. To my surprise, even the DJ Transport made a new low to join the party. This made it a confirmed Dow Theory low and this mean lower low is yet to come.
Don't be fooled by today's event to be a market bottom. Stay short and avoid long. We are still in a bear market and the primary trend is still down. Just remember, a market bottom is a process and is not an event. The market doesn't bottom in a single day. The process the market goes through to form a bottom is as the Dow make successive new low, there will be fewer indices making new low. When the Dow is the last index to make a new low, that's when it will put in a bottom. In the meantime, I will be looking for support near 7700 and 7300 levels, and continue to buy the inverse ETFs on any rally, i.e. DXD, SDS, QID, TWM.
