I’ve posted a “red alert” warning on possible market decline back at October 26. Since then S&P lost only 1.7%, but I believe that the real decline is to come this month.

The main reason is the unprecedented panic in today CMBX (commercial real estate CDS) indices and the absence of any bounce-back after last week panic in ABX indices. That spells out the $100b to $200b of real losses at the books of creditors in less than two weeks. The secondary reason is the third month of carnage in asset-backed CP markets.

As the stock market is a pretty unrestricted club where real dummies are admitted as long as they pay the bubble-up of bad news usually takes a lot of time. Let get some patience and watch – November will a be very spectacular month.

The charts are also flashing a warning just to add on top of the credit crunch panic. The bullish percent index is falling quickly:


The advance-decline line crossed down through the 200 DMA:


And finally the McClellan oscillator is swinging down: