Greetings from the Traders Expo in Las Vegas.  If anyone is attending and would like to enjoy lunch or dinner on me please send me a message via email or text.

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As for the market… YUCK… we wait.

Coach BD

Once again we are reminded…

Volatility is alive and well… and continues to drive this market to extremes.  After a beautiful, and much needed, reversal rally yesterday, today’s action is again confirming that we are still firmly in the grip of this big bear that has been in control since late last year, and that the major sell-off that began in late September has given no significant signs, yet, that it may be nearing an end.

While yesterday’s volume was significantly higher than recent down days, none of the averages made any attempt to challenge their respective 20-Day MA’s, and today’s bounce lower shows that the 20-Day is firmly in control of all of the big money bets.  Also, both the 40 & 50-Day MA’s are moving steeply lower heading for a showdown with the now flattening 20-Day.  And there appears to be no significant catalyst to break this downtrend, at least none so far… all of the news continue to be bad for our economy, and for the global economy.

This is a time to sit on the sidelines, patiently, and wait for the market to make a strong about-face, continue to hedge any LT positions tightly, collect ST premium income and look for isolated opportunities in good, battered stocks that could stage strong runs on any significant market turnaround or on good news (i.e. RMBS).  

We continue to like RMBS at these levels and believe the downside is close at hand with a huge and unlimited upside when the HJW starts handing down decisions in the two outstanding, but completed, trials that appeared to be clearly positive for RMBS.  

Coach BD

Watch closely today for a lower low on higher volume which would continue this week’s trend of lower lows on higher volume.  That would not be good… but I guess that’s not really any surprise to anyone in this market environment.

Coach BD 

Unfortunately…

The averages have broken below their recent lows from last Thursday, and today would be the 3rd failed attempt to move back above the 20-Day MA.  

If the markets close below last Thursday’s low, there may be more selling yet to come.  The only positive is that the volume so far today is fairly weak, but on recent down days it has picked up as we approach the close.

Keep an eye on how the market reacts during the last hour of trading.

Coach BD

OK…

Today will be the first significant test of the now flat 20-Day MA on all of the averages.  We want to see the test result in a close back above this first critical support level if this recent rally is to have any chance of continuing.

A close below it, especially if the volume and/or downward move accelerates into the close that would not bode well for the near term.

Coach BD

Welcome to November…

Usually the beginning of the Santa Clause rally.  We would actually like to see a low volume pull-back over this week without a close significantly below the 20-Day MA as a good test of the potential for more gains and a run at more resistance above.

Stay tuned, there may be good entry points in the near future.  We posted RMBS alternatives over the weekend and that is one of our primary trade interests right now due to the huge potential upside as these lawsuits begin resolving the uncertainty about how much royalties they will begin receiving.

Look at RMBS first.  We will begin posting more possible reversal candidates as they emerge.

Coach BD

Look for a close today on the DOW above 9,363… which was the high on Wednesday during this very good reversal week.  The only thing we don’t like is that it appears the volume is drying up to the upside which indicates real caution is still prevalent…

Coach BD

It appears that the market believes that The FED will cut rates today and add some stability and liquidity to the credit markets and open up lending once again.

Regardless of their action however, we need to keep an eye on how the markets approach the resistance above and how the averages ultimately react to all of the earnings coming out, most of them so far guiding lower for the next quarter.

We hope that there is some strong confirmation action in response to yesterday’s great rally but there is still a pretty large bogeyman waiting out there which is the very real possibility of a global slow-down and lower earnings for the foreseeable future.

These markets are definitely reaching a tipping point.  Let’s hope that the market really is beginning to move in anticipation of what will happen in 6 - 12 months and that will be a good strong return to sustainable global growth.

Coach BD

Well…  OK…

That was a very positive up day.  And after 3 high volume reversal days on 10/10, 16 & 23 this could be the day that begins a strong upward move.  Too early to tell for sure but a day like this ending at the highs on higher volume than recent down (bearish) days is a good sign.

Of course there is still significant resistance levels laying in wait above these levels from all of the short and long term trends, which are still all headed down.  The first is the 20-Day MA…  Let’s see how the averages react as they approach and test this level for signs of conviction in today’s buying.

Remember, all of the recent rallies have been met with heavy selling up against resistance, so the 20-Day will be the first test.  The DOW is very close to its 20-Day, with the NAZ & S&P a bit further away with more work to do. 

Maybe “Sell the Rally” sentiment is waining.  The technical picture looks more positive than it has in a very long time so we may nearing a point of upward opportunity.

Time to get focused back in on the action.  As you have read, we have been sitting mostly on the sidelines, keeping most of positions at or near neutral.  The action over the balance of the week may change our bias if we get some good confirmation action on high volume.

Stay tuned… it may be time to put some capital to work.

Coach BD 

Today was kind of a mixed bag…

We didn’t get everything we wanted, or needed.  We got the huge high volume gap down at the open, that was good…

Then we got a good high volume rally back up, but then the market drifted generally lower until about 3PM when some good high volume buying came into the market and we were, at one time, up ~300 points from yesterday’s close.

Then, unfortunately we saw some more high volume selling come back into the market which turned a near 300 point GAIN into a 128 point LOSS over the last 25 minutes of the session.

Generally, this is the kind of action that we don’t like to see at the end of the day.  However, it may have been tempered somewhat because of the long holiday weekend, with many institutions and funds not wanting to commit too much long exposure and taking some ST profits, and wait for Tuesday to see how the beginning of next may shape up.

We continued selling some of our ST downside hedges today that were near full value (spreads), as it appeared that we may get that strong reversal that we wanted to see after yesterday’s close at the bottom of the range.

The only thing that makes a nervous here is that even though we made a nice upward reversal overall, the averages still closed at new lows, and we don’t like that.  Plus, the VIX, though it did back significantly off of it’s session highs, still closed once again at an all-time high.

We are not yet ready to commit new capital to any LT Long positions, or open any new ones, just yet.  We will be happy to wait until next week to see what happens.

Everyone have a great weekend, and marvel at some of the most intense, crazy, and exciting market action in history.

Coach BD