The bulls are waiting in the wings

We believe there is some light now shining at the end of the bear tunnel. We are looking for an intermediate term bottom for this market. By intermediate term, we mean a bottom which would hold for 5-8 months and provide a strong rebound rally, where individual stocks could go up 300-400%. We believe this BOTTOM should be in the next month or so. Very tentatively, we are looking at the date surrounding mar 27th.

Leaving all technical analysis aside, lets look at the psychological perspective here. From a bull-bear perspective, the last bastions of the bull are about to give way. By last bastions meaning - the final few bulwark stocks which have held up relatively well - healthcare (e.g HUM), Oil (XOM) and chains (e.g. WMT, MCD). Almost every other stock has been obliterated. Basically, the bear has declared victory over the bull in every battle(Stock) i.e the bear is satisfied (at least for a while). In the previous bear markets, we researched - we found similar behavior. When the final few bastions fall, there is indeed a bottom.

Accordingly, we have trimmed out of all index shorts. We are short a select few names like XOM. We believe XOM could test the double bottom area again.

Addendum: March 11th is another important date we missed. This could also be the potential turn date. It is really late in the short game now. We are searching wide-eyed for long buy triggers. After all, bottom fishing is dangerous.

Turndate

We are going out on a limb here. We believe the markets are very oversold. We are looking for a 10-15% bounce which should start by the 25th. Our targets on the SPX is around 830-850 region. The target date is march 13th.

Lets see if we will come to repent this call.

Addendum:
We are looking at this as a scalp long opportunity. We don't believe the down move is done yet. The downward pressure should resume by Mar 13th. This is our best guess given the market action thus far.
As for XLE, we are waiting for a 'kiss-of-death on the triangle boundary to short some more.

XLE

The above is a weekly chart of the XLE (energy spdr). Energy companies form some of the largest components in the SPX; XOM (Exxon) itself accounts for close to 5%. These stocks fell off a cliff and had a steeper fall than many others in a short period of time (July  - Oct). Since then, as has been in our stance in our previous post, a time correction is going on. Accordingly, the XLE (and the XLU - utilities spdr not shown here) have been in a sideways triangle pattern. 

So the bad news - Triangles are continuation patterns, meaning another downleg is very likely.

The good news - Triangles are almost always occur  just prior to the "last" move in the direction of the trend.

So, when the triangle breaks down(our guess within the next month) and there is a downward thrust from the triangle, we should see a large recovery rally. Usually these recovery rallies tend to retrace the whole "last" leg and then some more.

We will be watching very keenly for the breakdown and signs of downward exhaustion, since there is money to be made both ways. The triangle is invalidated if XLE rises above 53 or so.