Aaron Armstrong, March 03, 2008

There is the potential for significant downside exhaustion on the back of a daily QQQQ buy Countdown, 240 minute buy Countdowns for XLF and daily TDST support and the prospect of more buy Countdowns to come in the next few days if the downside does persist. In other words it is getting closer but is it there yet? I'll try to shed more light on that in these charts.

One can take a few approaches to this, they can buy weakness into these market structures on the idea that selling will exhaust itself but then the question of the buyers ability comes into question. Just because you reach potential selling exhaustion doesn't mean that bulls will be able to power the market higher.

I am taking more of a wait and see approach because many of these buy Countdowns are occurring on larger time frames and that gives us the ability to widen our price and time expectations for any long trades, in essence it gives you a little more room to watch and wait for some signs of life without soaking up all the buying potential that might develop.

I also still think that rallies are shortable until proven otherwise so you may just want to view all this as the generator of your next possible short opportunities on any rallies.

The reaction to TD Sequential downside exhaustion market structures so far has continued to support the bear market. If buyers are not able to take hold in the coming day or two or three, for anything more than just a decent bounce, then prices are very likely headed to fresh lows and then we can see what sets up.

I am acting on the side of caution for now because being at new equity highs for 2008 doesn't make me want to step out and aggressively buy what is still a less than ideal long-side opportunity.

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