The Nasdaq 100 was escorted sharply lower Friday by a bad earnings report out of Dell that was less than inspiron (insert ba don chi). The broader market fared better, but still got chunked for over a percent. The S&P 500 sank a bit below the consolidation zone proposed in Thursday's post, but although it lost the 65DMA, volume receded from Thursday's breakout level. The extra dip can be attributed to some commiseration with the NDX. However, the potential for a wave C extension of the countertrend rally out of July has not been lost.
I simply do not believe this market will roll over until the banks are ready to sink again, so you will not find me chasing this dip. As you can see, the banks held up just fine today:
Our purported wave C rally may also receive support from commodities, which appear on the cusp of another violent sell-off.
The fact that oil has failed to form a significant rally in the face of Gustav further illustrates the weak foundation in commodities at present. It also illustrates that news is typically used more as an excuse than a reason for market moves.
To sum up my present expectations: I see commodities slumping again almost immediately, which should lend a hand to a rally in equities that will finish the countertrend move of July's low, as well as bring the BKX back up to major resistance. Such is the current working model, and if events unfold differently, I will react accordingly.