In fact there weren’t too many people who thought our equity markets would end up lower, but the SPX has set a new low. Here’s where we are at right now:

First of all, we nailed the exact top as the market turned right before new years eve at 617 hours off the August low. This is a fairly complex SPX. What I’ve uncovered is the middle leg at 111 points; this leg when it was at 180 points the other day had a perfect golden spiral relationship. It extended, which could mean we are in a 5^th wave right now. We could also be in a 2.618 extension and we could also be in some relationship to that first leg down back in November. It was a shot and it was the best technical indication I had in order to gauge a low.

Traditional risk is high for bears right now for a snapback, especially with the kind of sentiment we have with the "worst performance" in the history of the stock market. The other problem we have right now is in the Dow Transports. I had a target for a bounce at the 200-week moving average. The fact they couldn’t even stall at the 200 week moving average is huge.

Back in November we discussed this could be the most damaging drop of all. There are lots of charts which still haven’t taken out their August low, but when you have the Transports leading to the downside at a time when the oil market is drilling to the center of the planet, it is a very serious development.

I’ll maintain we are setting up for a dangerous snapback to those who are complacent about their bearish positions. Here’s what bears need to keep in mind: Hope dies hard, but fear drops like a rock. The emotions that create stock market tops are entirely different from the emotions that manifest bottoms. That being said, I sincerely doubt we are looking at a long-term bottom as we are not even close to the VIX reading from August, yet we are at the those same lows right now.

If that doesn’t wake up some people, nothing will. Bear markets only consume a little over one third of stock market time. That means some people wait for targets to get hit that take much longer to achieve, or never get there because fear levels get to a point the market can’t sustain. Don’t take this the wrong way—I believe there is unlimited downside potential, but it could take weeks or months to get there.

Bears are going to have to decide where they want to lock in some of these profits waves like we’ve had in the past two weeks and don’t come along very often; it would be such a terrible thing to waste.