The Wrap 10/5/11..Things That Keep Me Up At Night



At the risk of being a wet blanket, this is what could be developing.  I emphasize “could be”. If you remember a few Thursday’s ago the market got lit up to the downside, I believe it was Sept.22, we then rallied for three days, serotonin and electrolytes were released in trader’s brains and it was all good again. The market does have amnesia, it always has. That three day rally ended up being a bull trap as confidence and complacency set in.

What happened next was a 120 handle move lover in the S&P. It’s all in the chart above.

We all know what happened yesterday and again today, as we went into melt up mode again late in the day. As I look at the chart above. I see what could be the start of another bull trap and this one could be of greater significance. It’s still early, but I would look at the green line, which is the 20 day simple moving average, roughly 1164. If we get through that level, it may have a shot of tagging 1183, which is the 50 day simple moving average. My early guess is that it may see resistance at the 20 day moving average.

Bear markets usually don’t end with a big sell off off like the one that we saw the other day when we broke the 1100 level, they actually end with a whimper not a bang.

Reading tea leaves is tough and sometimes it’s tough to prevent yourself from seeing something that may not be there. Maybe there isn’t anything there this time and I would like to see maybe two more days of tape action before I even convince myself that we wont break to more lows.

I have one name on the swing list (The P&L) and it is GLL. I had a 60 cent stop and it was hit. If you are still long (many of you make your own levels), the ETF is still in a bullish pennant on the daily, but stops generally should be honored, a little wiggle room though is fine.

I am still more active on the chat room as this market is moving way too fast. that will change soon I’m sure. We had a decent day on the chat today with TQQQ, SPY and OIH . Tomorrow is another day and we will see if the bulls can continue to take the hill.

Tomorrow we have continuing claims which will be reported at 8:30 and Friday is the big kahuna which is the September non-farm payroll number. Friday’s report could be a market mover.

See you in the morning.



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