First of all we are not even looking for a market bottom here.  Bottoms to bear markets like this do not form overnight.  They take months.  We are just trying to divine (divinate?) where the rally is likely to start.  We are going on 45 days of downwave now.  That is a pretty long wave.  Is there any way to know whether a rally (strong or otherwise) is likely to start.  Note this well: NO.  There is a negative indicator.  Peter Eliades just said that the Dow was going to 4000.  That probably means we are close to a bottom (irony).  When pundits start exposing their probisci to low flying eggs and making wild predictions (intended to generate attention getting traffic) but which usually result in egg on the face we perk up.  Ah! An Indicator.

Otherwise faithful readers there is not a person on earth who knows where the bottom is or when the rally will start.  As we are short these questions have a world of room for us.  Our Variant 1 Basing Point and stop are illustrated on the chart.  Readers might want to consider using Variant 2 and advancing the stop based on new lows at 3% down.  We are studying that and also studying the chicken entrails as to whether there might be a rally in the offing.  We looked at all the Dow stocks.  A sad picture.  But we saw 5 or 6 which might be on the edge of a rally.  Besides a few which were keeping their heads above water.  Shocking.  Sobering to live (so far) through 1929 redux.  The volume pattern the last few days might support a rally. And reexamining the long term charts there is a hint of support at 6400. Otherwise, rally or not there is every possibility that we could get to 5800.    We have been thinking about adding on to positions here.  Then we started thinking about it.  Maybe a cleverer tactic would be to take a few profits here– a light scaling out operation.  At any rate we suggest and our readers decide.  We are not the deciders.  (Hear they are partying it up in Dallas.)

The present pattern is not a panic, but market waterboarding. (What do you expect from the dregs of the Bush Administration?)  It looks like the bottom fishers have caught a bunch of old tires and boots and gone home.  We don’t put a lot of stock in those old market saws about when the last fisherman has tossed in his bait the market will rise — although there may be some truth hidden there.  The chart will tell us when the bottom is in.