Jim Cramer said, “Don’t buy now, buy after the pull back.”

We believe the rally will now falter and estimate the pullback will be between 15% and 25%.

If you look at the market highs of early January, the lows of early March and the highs now in early April you realize that not only was the March decline the worst since the 1990s but the current highs are still 4% to 13% lower than the previous January highs. Declining lows and declining highs is not bullish despite the last gain of over 24%.

................H.........L.........H........Loss......Gain......PtoP Loss
DJI.........9175...6440...7978...-29.8%..23.9%.....-13.0%

S&P..........944.....667.....834....-29.3%...25.0%....-11.7%

NASDAQ.1666....1266....1603...-24.0%...26.6%.....-3.8%

The table shows the previous DJI high in early January and the March low in early march compared to yesterday. It shows the loss from January to March was 29.8% and the gain from March to April was 23.9%.

The recent peak to peak DJI loss is still 1197 points or 13%.
The peak to peak S&P loss is still 110 points or 11.7%.
The peak to peak NASDAQ loss is still 63 points or 3.8%

A bull market is not defined as a greater than 20% upward move. But that is nonsense because the move was preceded by a 30% decline the month before. The unprecedented chaos just means the market is volatile. A bull market requires there be a new high and ascending lows. The DJI will not produce a DOW buy signal until it rises more than 1197 more points. The market will probably test its bottom again before it is time to buy.

The recent rally put the re-spiral/MACD indicators back on track for a countdown to a buy signal. But remember the best time to buy is between when the first buy signal occurs and the re-spiral second buy signal (the confirmation signal) occurs. But it is not time to buy yet.


Market forces

Cash flow was slightly positive into the markets yesterday even though half the gains were whipped out by the end of the session. Volume during this most recent rally was barely more than the 50 day moving average. That is not good. This current high is significantly lower than the previous high… and that is not good. The last low was lower than the previous low… and that is not good. Finally the monthly market swings are now greater than + or - 20%... and that is chaos.


Market Outlook

All the signs are saying this rally is over and it failed to set a new high by margins of 4% to 13%
Yesterdays surge was again on low volume. It did however alter the recently negative Parabolic SAR and MACD trading trends and put them back in a countdown towards a buy signal. This is still a trader's market not a long-term investors market but after the next major decline it may be time to buy again.

Asian shares were flat last night with Shanghai (China) down 0.2%, India up 0.2%, Japan up 0.3% and Hong Kong up 0.2%.

European markets are currently mixed in the range of -0.4% to 0.8% mid way through their day today.

US futures indicate the DJI will be down about slightly at the start today. All the American equities markets are extremely over bought... as overbought now as they were oversold four weeks ago at the lowest point in twelve years.

It is expected that today it will be reported that layoffs are accelerating indicating that the recession is still accelerating. The economy is now expected to decline well into early 2010 but it is clear that the market psychology is improving even though the economic news of the rate of economic decline is worse now than ever before in 60 years. But America has always come through in the past. We hope that this next market decline will finally show that the stock market has passed the low for this recession.