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[kaiser soze]

Case for up day on Monday :

1. Select Financials MAY have bottomed Thursday
2. BPFINA (Financial sector bullish percent) is at 30
3. NYMO, NAMO, etc are all in deeply oversold territory, meaning broadmarket may have seen a wash-out after two 90% down days.


Case for down day Monday :

1. Sentiment as measured by put-call ratios is still elevated. Specifically, OCC data shows less fear than after 02/27/07.
2. Bullish percent indices of the major market and sector indices are nowhere close to oversold. BPFINA to can go as low as single digits.
3. As Larry T said, downside breadth momemntum is very strong. The two 90% downside days are more characteristic of a trending decline per Lowry's.
4. A lot of shorts covered on Friday i.e. they were faked out into thinking Fri was a bottom. Eg Odd lot shorts declined Friday and short only hedge fund manager Doug Kass, closed his shorts Friday.
5. Paulson's comments on Friday were not re-assuring at all. My subjective interpretation was that he said "Markets are markets. Whatever has to happen will happen"


The PLAN :

Watch the financials. If GS trades below 189 ( alevel it reached in Thursday's trading action) and BSC breaks below 119, its curtains for the market. We CRASH. If we open gap down, that may be an early clue that the day is going to be a nasty one. If open gap up, we are likely to have bottomed for the next three-four days atleast.

Even on Fri, the late day market rally fizzled only after GS weakened and turned negative for the day.

1. 1998 Bullish percents on major indices and financials compared to now.


http://stockcharts.com/c-sc/sc?s=$BPFINA&p=D&st=1998-01-25&en=1998-12-31&i=p26183293368&a=110232249&r=4438.png



http://stockcharts.com/c-sc/sc?s=$BPFINA&p=D&yr=0&mn=9&dy=0&i=t69867270446&a=110232249&r=814.png



2. Breadth momentum in 1987 vs now. Notice how the McOscillator made a downward spike first in Sep, and the second spike one month later was the crash and the McO bottomed around 160. Now the downward spike was made on Feb 27, 2007. And we are in the middle of the second downward spike five months later and the Mco value is 123 meaning as oversold as we are, there is more room on the downside. Another possibility is that the similarity may result in an identical points decline instead of a percentage decline. On Black Monday, the Dow declined 508 points. We might then bottom after another 508 points on the dow which would be 12757 and change.

http://stockcharts.com/c-sc/sc?s=$OEX&p=D&st=1987-06-09&en=1987-10-29&i=t73313708870&a=113073937&r=845.png

http://stockcharts.com/c-sc/sc?s=$OEX&p=D&yr=0&mn=6&dy=0&i=t01667500985&a=113073937&r=427.png