Wednesday, October 15, 2008

Pullback Or Continuation Of Downtrend?

It is still too early to tell if today's decline is part of a correction of Monday's rally which will lead to new bear market rally highs, or whether we are proceeding down to new lows immediately. I suspect that the markets could be trading in a range, possibly a triangle pattern until the election is over. It is hard to imagine a scenario that would have the markets advancing on volume for a follow-through day before the election.

Currently support is 8828 and 8613 for the Dow, and 32.82 and 31.97 for the Qs. Breach of 8613 and 31.97 would confirm the downtrend continuation.

Yesterday I exited my short hedge (index long) positions on the open for a nice profit and initiated new index short positions. My intention is to stay in the index short positions until we get a valid confirmation of a new uptrend or my downside targets are met. I will discuss the possible targets once the market action unfolds for a few days.

Currently, the Dow would need to rise above 10,365 and the Qs above 39.50 to show a real change of character.

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