The Process

As  have said many times, a top, bottom or a reversal is a process. There are a lot of valid reasons for this, but  just want to show you an example of the most recent serous downtrend in the SPY at the start of August.

The red arrow is distribution on this 30 min chart. Smart money doesn't want you to know what they are up to, otherwise it would cause unfavorable prices for them, so look how long it took to distribute this top before the decline. Notice volume s rather light, they don't do things quickly and big, despite what technical traders think. They don't show their cards. When the downtrend started at the white arrow in price, technical traders think, "THAT'S SMART MONEY SELLING", BUT THE TRUTH IS, THE ALREADY SOLD LONG AGO AT BETTER PRICES AND ALSO WENT SHORT. Technical traders always chase the volume spikes thinking it's smart money, but smart money is too smart for that. They are just creating panic or greed that they can then use to their advantage as this chart above show-pay attention to the 3C distribution and volume, then the downtrend and volume-smart money was out long before the downtrend started. That's why it takes some time for them to put positions together, they don't want to advertise their intent and drive prices against them, they do it quietly and some times, that takes time, thus it's a process, not an event-unless it's something like the Japanese earthquake where the market must quickly discount something that they had no way to know about in advance.

As far as what I believe is a bottoming process going on right now, we still may see some ups and down and some may be quite extreme, but it's still a process.

Before the fall on Friday, we had about a week's notice something was coming and at least 2-3 days notice to rearrange our portfolios to the short side for the fall last Friday.

I personally was 100% short in the model portfolio on Thursday, I cut that nearly in half on Friday and reduced it again today, I'm working toward flat and then I'll start accumulating when the signs grow stronger and if I miss the first 1/2 day or day, SO WHAT! At least I knew when to take my profits and which way the market is most likely heading when others are completely lost or on the wrong track.

As far as tonight's charts and for tomorrow...

 Lets start with the SPY as our main example. Our targets on the conservative side have been hit. I said we need to see the market go as low as need be to gain the confidence of shorts, even if that means a new low, but certainly we'd be inside the triangle or below it as we were today.

 The 5 min chart shows a head fake today, is it the last? I don't think so, but it made Wall Street money. The break on this 5 min chart below the triangle's apex drew in shorts, but the lows were accumulated right off the open and sent the market to a minor loss of -.73% when it was down as much as -3%. The positive divergence below the triangle shows this as a head fake, a lot of shorts got burned today on the opening action and quite a few members made good money buying this open.

 Here's the 1 min SPY chart, look how high the 3C positive leading divergence reached today-higher then Sept 1st before the fall, so the accumulation we were looking for last week s certainly there so far.

 This 5 min chart is important and all of the averages look roughly the same as this. It shows accumulation on the open today and then distribution toward the close. My guess is that prices may be getting a little too far ahead of where Wall Street wants to accumulate and I think we could see some weakness tomorrow bringing pries lower in to their accumulation target zone.

 The 15 min chart is starting to lead, so the accumulation on the short term charts is starting to accrue on the longer term harts, which is what we want to see for our market theory, again note how long distribution took before the fall-it is a PROCESS!

 Finally the 30 min SPY chart is simply n line, there are no hints of accumulation yet. The 15 min chart will have to be stronger before the 30 min hart will show signs of accumulation. Remember, the longer timeframe and the longer duration the accumulation, the bigger the reversal move.

 Now the DIA-almost all of the charts look the same, so I want to focus on the 1 and 5 min charts. This 1 min chart shows leading positive divergences-good accumulation.

 The DIA 5 min shows the same end of day negative divergence which makes me think we will see some selling tomorrow.

 IWM 2 min-strong leading positive divergences

 IWM 5 min, the same negative divergence at the close.

 QQQ 1 min, better then in line and leading positive

Again, the same weakness at the end of day on the 5 min hart.

So I feel we will likely see downside tomorrow, we want to see that downside accumulated and the 15 and 30 min charts advance with positive divergences. Again, it is a process.