For Sunday, July 6, 2008                                          Go to Website
	Current Strategy Positions FibTimer currently has 11 successful timing strategies   Aggressive S&P Position -         BEARISH   Aggressive Nasdaq Position -  BEARISH   Aggressive GOLD Position -      BULLISH   Aggress. SMALLCAP Position - BEARISH   U.S. Dollar Timer Position -        BEARISH   Aggressive BOND Position -      BULLISH These positions were started over previous weeks. You need a paid subscription for real time signals. Sector Funds, ETF and Stock positions are not included above.

Last week we wrote:

"...After last week's break below critical support, the S&P 500 Index - SPX has not only continued lower, but has declined to the prior panic low levels reached in January and March of this year. Under normal circumstances such a decline would be a setup for a reversal. There very well may be some upside here based on the obvious support levels having being reached. Whether any upside will hold though (or even occur), remains to be seen."

This week:

Last week the S&P 500 Index - SPX reached the panic lows of January and March. That set up the possibility of a reversal or a break below support that would set up the scenario of lower lows ahead.

It appears that lower lows are what we have to look forward to. This week was extremely bearish for the stock market and it seemed that no good news could do anything to inspire buying. Every attempt at an advance was quickly followed by strong selling.

The SPX closed below the 1270 level and then closed below it again thus confirming the break of support. A look at the SPX chart at the bottom of this analysis clearly shows this break of support that now forecasts considerably lower lows in coming weeks and likely months.

That said, a short covering rally could occur at any time. But a rally that lasts is very unlikely and here are the reasons why;

The break below the prior panic lows should have been accompanied by rising fear in the markets. That would indicate the selling has reached extremes and a reversal could occur and hold.

But the second chart (below) shows why we feel the true market bottom has not yet been reached. We have used the CBOE Market Volatility Index - VIX before in our analysis. When traders become believers that the markets are headed lower, they buy insurance in the form of puts. The VIX measures this buying.

At true market bottoms, fear has taken over and everyone is selling what he or she can to either cover losses or just to get out at any cost. That fear will be seen in panic buying of puts and the VIX will have a huge spike to the 30.00 and even 40.00 plus levels.

This weekly VIX chart shows panic buying occurred in January and March. But in this decline, which has now reached lower lows than those in early 2008, VIX is displaying an incompatible level of complacency. Closing at 24.80 on Friday, after two weeks of extreme selling, there appears to be little to no fear in the markets.

Fear and greed are the two major emotions controlling rallies and declines. Extreme greed marks market tops and extreme fear marks market bottoms. By this measure, we do not have a market bottom yet.

Could the stock market reverse and rally anyway? Sure, but it is not a good bet. Until extremes of fear have taken the market to a true bottom, it is unlikely any rally will hold.

This week the TV was full of talk of bear market levels in the markets as the Dow Jones Industrials - DJIA have breached the 20% loss level and the SPX, a much broader measure of the stock market, has also now reached the 20% loss that labels this decline a bear.

It is NOT typical for a new bear market to just stop at 20%. The 2000-2002 bear loped 50% off the SPX and 80% off the NDX. That may have been extreme and the result of a hugely extended stock market bubble in the late 90s, but no one knows how far a bear market will go on the downside until "after" the bear market is over.

The Nasdaq (we use the Nasdaq 100 Index in this report) has not reached bear market levels but it was declared to be in a bear market in the March decline when the 20% level was reached, so technically this could have been nothing more than a bear market rally. A sobering thought. The NDX analysis is below.

Note that in Elliott Wave analysis, this break below the prior Wave C levels calls for two more waves in this bear cycle. At least two more depending on whether we are entering an even larger down cycle. The old Wave C has been relabeled Wave 3 in expectation that we will now have Waves 4 and 5 ahead.

Last week we wrote, "We do not know what will happen on Monday, but we are watching for any potential reversal to fail in coming weeks and a break of support to set up considerably lower lows. Much would depend on the strength of the reversal should it occur."

That is, again, the forecast. A rally could occur at anytime in this oversold market, but expect it to fail. lower lows are again likely, if not early next week, then in future weeks.

The SPX position remains in a cash position for both aggressive and active traders. Perhaps this was too conservative for aggressive traders, but we were looking for a reversal as we had in every decline over the past year. There were very bullish signals before the March - May advance began, so another bullish reversal appeared the best bet. In a very short time though, the potential for a lasting reversal has diminished and it appears that we have considerably lower to go.

Note: For subscribers, who overly worry about short term swings in the financial markets, remember that you do not have to be an aggressive timer to be a profitable timer. This strategy can and does incur small losses on occasion. Money is made in both aggressive and conservative style trading. Our Conservative S&P Timer strategy trades only the long term trends but that means it profits without the numerous buy and sell signals that active and aggressive traders take.

The SPX portion of this strategy is in a BEARISH position. Subscribers following this strategy should be in a CASH (money market funds) position in both the Bull Only (active) and Bull & Bear (aggressive) strategies

S&P 500 Index (SPX) Daily Chart

CBOE Volatility Index - VIX, Weekly Chart

Nasdaq 100 Index (NDX) Chart Analysis

Last week we wrote:

"... While the SPX is in full retreat, the NDX had been in (by comparison) only a mild correction, until this week. In very heavy trading Thursday, the NDX declined to its first support level at 1853.92. This marks the 50% retracement of the March-June advance."

This week:

The Nasdaq Composite Index - COMPQ and Nasdaq 100 Index - NDX (that we use in this report) are still holding up better than the rest of the stock market.

Though the 50% retracement support level has been broken, heavy selling was unable to take the NDX below the critical 61.8% retracement support level at 1810.

The concern though is that this may mean the NDX just has further to fall if the rest of the stock market continues lower. The NDX may be holding up well now, but with no real fear yet in the financial markets, once that fear increases, we could see wholesale unloading of NDX stocks.

NDX 1810.62 remains the critical support for this index, but we see the likelihood of this level failing, and then lower lows on increasing momentum in coming weeks. It is hard to see support holding for the NDX, at current levels, with the SPX at new 2008 lows and below even the prior panic lows of January and March.

Though the NDX remains a much stronger index, this does not mean it is a safe place to be. If the SPX breaks down to new lows next week, the NDX will follow and could easily decline considerably faster.

Technically, the NDX reached bear market status in the March sell off when declines topped 20%. We could have seen nothing more than a bear market rally in the March-June advance that now will be followed by lower lows. This is hypothetical of course. There is no way to predict this. But certainly, it is of concern and just as certainly, thousands of traders are thinking the same thing.

The NDX portion of this strategy is in a BULLISH position. We are now in the Rydex Nasdaq 100 Fund - RYOCX (or other bullish Nasdaq 100 index fund) for both active & aggressive traders.

Nasdaq 100 Index (NDX) Daily Chart