The stock market and the major Indexes have taken a terrible beating over the past several days. Investors are at the point of throwing in the towel, which in my estimation would be a mistake now, because our Indicators and the Japanese Candlestick price formations in the Dow Industrials Index and in the S&P 500 Index suggest that prices are coming into a low and that an upside reversal is due. Furthermore, the Candlestick formations of the Russell 2000 Index and of the S&P SmallCaps 600 Index suggest that, in those Indexes at least, the turn has already come and that their prices are in line for a substantial upward correction. So in that regard, the Russell and the 600 may be leading the pack.
I think that the correction which is in store could be quite substantial. This will not equate to a reversal of major trend, which remains Down; but its imminence ought to be enough to dissuade disillusioned shareholders from selling now. The right time to sell, unfortunately, was a year ago; but that’s water under the bridge. The correct action right now would appear to be to wait for the correction to take hold and then to assume a selling stance as near to the top of the expected crest as possible.
In particular now, the Russell 2000 and the S&P 600 assumed Candlestick “piercing” patterns last Friday right at the bottom of the low. Prices “pierced” quite substantially the price bars of the previous day. I take those moves as strong suggestions that the move will continue upward into a meaningful upward correction until prices finally crest and then turn down again in the major downtrend.
William Kurtz October 12, 2008 http://www.candlewave.com