CHOP CHOP, BACK AND FILL...

Good morning traders! The bulls stepped up yesterday and wrested the power of control away from the bears to print a strong engulfing candle...but on rather poor volume. It really seems like the big money has been on the sidelines since late-August, too content to trade commodities and forex. But that is likely to change next Tuesday when the Fed announces their decision on rates. Futures are pointing to a 75% chance for a 50 bps cut...which would and should send the markets into a feeding frenzy! But I think we rally even on a more modest cut as it would indicate the economy is not as bad as everyone fears...though it may take a couple days to get that going. If the Fed sits pat, then look out below!!

See the chart below of the Q's (NDX 100 proxy): we are looking at a very nice and bullish IH&S pattern develop that should complete by crossing the neckline over 50 next week. Until then, I think we will get some "back and fill" chop chop today and tomorrow as that right shoulder gets filled out a bit more. I put on a hedge in our fund into yesterday's close (using QID) but will likely take it off sometime today or tomorrow. Any dip today shouldn't go too far, and there is not much news on the horizon to move things one way or another. In short, let's bask in the warm glow of yesterday's AWESOME GAINS (wow!! every long but one outperformed by 50% to 300%!!), reign in our stops a bit, and wait for what should be very good things to come.

Other stocks to consider: (longs) FWLT, GSF, GRMN, RADS, RIG

BEAR TRAP IN THE MAKING

Good morning traders! Just as the bulls got trapped last Friday, so the bears will likely get trapped today in this "push-me, pull-you" market (see yesterday's post). We have an overhead gap to fill on the indices and that is likely to happen today as shorts get squeezed into submission. Our internal readings tell us that we are near a major bullish pivot point for the market going forward into the 4th Quarter, but not much is likely to happen until we get past next week's Fed announcement. Until then look for more chop chop...

Blessings and happy trading to all, TC

Stocks to consider:

(longs) GRMN, GSF, RADS, RIG (shorts): BEAV, ASML, GLBL

THE PUSH-ME, PULL-YOU MARKET

The surprisingly weak jobs number on Friday really spooked the bulls and rallied the bears from their slumbers. The markets gapped down and printed a trend-down day...until the last hour of trading when it seemed like the bears decided to get an early start on the weekend, allowing the bulls to scoop up bargain shares. We can expect more of this bull-bear battle in the days ahead as the markets look for a local low to consolidate the recent sharp run up off the August capitulation low.

Alan Farley on his website, hardrightedge.com (Farley wrote the foreward to our forthcoming book, by the way), said this about the current market condition: "Market players don't know whether to bet on a slowing economy, or the benefits of lower interest rates. This conflict is creating a manic-depressive environment, in which bull and bears pass around the leadership mantle like a hot potato."

We agree: in short, look for more volatility ahead....but there is some good news ahead for trend traders like us! The internal indicators we use to measure the overall health of markets (NASI, Adv/Decl, TRIN, etc.) hit multi-year lows last week. Over the past 10 years, anyone shorting the indices at these levels has lost money every time. Thus our plan is to sit tight on our open longs with stops in place (just in case the bears get a little too headstrong), and continue to look for the best charts with upside room. As it looks now, if we can get past the next week or two's volatility, we should be nicely poised to catch the next bullish leg up into the end of the year.