The Stock Market Is Making History

Man oh man, we’re making history here. This past week will be talked about by traders years from today. I know this bear market has taken its toll on many investors, but enjoy it while you can because you’ll never see a market like this in the rest of your life time.

That chart sure doesn’t look pretty, and I hate to say it but it will look much worse in these coming months. Breaking below 1150 has caused panic in the S&P 500, technically speaking we have nowhere to go but down now.

Wednesday’s analysis is pretty simple, forget those daily minute charts and look at the big picture. The red line indicates our nearest support. Sadly it’s at 800. It wouldn’t surprise me one bit if we were to test those 2001 lows in the near future.

Now not to scare you, but take a look at this:

The VIX index (^VIX) measures volatility. We’ve never seen such a scare in the markets since 2001; panic levels in the markets are almost double that of 2001. Typically you would buy stocks once the VIX approaches 40, but we’re past 55, so why isn’t anyone going long?

On September 15, 2008 I mentioned that “the credit crunch is not just a U.S. issue but a global one”. This is exactly what’s going on thus causing all this fear in the markets. You may think the U.S. economy is bad, but think again! Europe’s economy is in big trouble too. As you can see, the government’s bailout plan along with today’s reduction of key interest rates from 2% to 1.5% has done nothing to revive this market. The overall trend is obviously down, but we should recover - but when? I honestly don’t know, I just hope it’s soon because dropping all the way to 800 before a relief rally is unhealthy for both the bulls and bears.

With the volatility index at all time highs, it wouldn’t surprise me to see a big 1-day 100 point rally in the S&P. This would be a great opportunity to get out of your longs and into bear ETFs if you haven’t already. For ETF products, go to ProShares. I strongly recommend SDS and TWM (remember when TWM was at $60 just a few weeks ago?). Furthermore, it is a good time to look into gold and oil companies again.

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