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.

selling resumes

Monday saw a resumption of selling, after a week of choppy sessions that failed to deliver any real upside.  We believe this negative sentiment in the QQQQ should set the trend for coming sessions.

More earnings damage after the bell

After several important earnings misses / lowered outlooks from companies last week, we have had several more tonight, with Schering Plough, Merck, American Express, and specifically for those interested in the QQQQ,  Sandisk and Apple.  The QQQQ is already selling off over 1% after the bell tonight and should lead to weakness in the coming sessions.  We feel that there is a good potential for accelerated selling pressure in the near future.

Heavy selling

It is rare that a 4% move occurs in one day in the QQQQ, but this happened Thursday in heavy waves of selling.  Friday's open was pointing to some calm, but selling has resumed as we write this (9.46 am EST) and the index is down 25 cents.  There doesn't appear to be a bottom nearby for support.