One of the worst days for the market...ever

With the extraordinary selling on Monday, it has become clear that the "normal" methods used to forecast a stock average must temporarily be put on hold until the market begins trading with normal cycles. Subscribers who have followed our advice in September have not only been protected but also had the potential to make an approximately 33% return since September 3 using the QID unit. Picking the bottom with a market being potentially driven by the timing political passage of a bailout bill is not a sound way to invest and picking the bottom here will both be dangerous and tricky. There is the potential with the bailout bill's passage in congress later in the week, along with the September quarter ending (fund managers report their quarterly results), October might begin to mark some kind of bottom. We will be watching closely for signs of a turn but for now remain bearish.

Market can't get past underlying problems

With last week providing several shocks in either direction to the market, our hope was that this week would bring some stability to help forecast the future. However, today's selloff puts the momentum squarely with the bears, and is not likely to end anytime soon. A government bailout does not seem to be calming the markets which must still deal with a continuing housing problem, liquidity problems in the fixed income market, and high energy prices.

Extraordinary down day

You've seen all the headlines and don't need us to reiterate them, but needless to say the short side of the QQQQ trade is the place to be. With movement like today and the likely daily flow of market-moving stories, it will be tough to call a bottom with accuracy. Until we see any sign in our model giving us reason to change, we see continuing weakness ahead.

So much for the bailout...

Our idea that September could be shaky seems to be on track so far.  The enthusiasm about the Fannie / Freddie bailout quickly dissipated, and Tuesday's action showed lots of technical damage.  Lehman is now hitting with a potential implosion / discount sale, again stressing the financial system.  We will see how this shakes out, but our estimate is that there is much more trouble to come.

Fannie and Freddie bailout fail to inspire large tech

The big news surrounding Fannie and Freddie failed to inspire a weak QQQQ, finishing today's session down 0.14. While we always must be on the lookout for a potentially violent short squeeze, September has the feel of being particularly ugly for the broader stock indices at this point. We believe the housing problem in the US has a LONG way to go before washing out, with further credit and consumer spending pressure to come.