Uncertainty Prevails...Markets Break Support

DJIA - 777.68, -6.98% SP500 - 106.85, -8.81% NASDAQ Comp. - 199.61, -9.14% Russell 2000 - 47.07, -6.68% Exchange NYSE NASD Advancing 202 422 Declining 3,333 2,557 Oil $96.37 -$10.52 Gold $894.40 +$5.90 $SOX 293.31 -28.31 Strongest Sectors: XLV -2.24%...XLI -3.39%...XLP -3.75% Weakest Sectors: XLF -12.18%...XLE -11.89%...XLK -8.65% Sector Watch Up Trending: Sideways: XLF, XLV, XLP, XLY Down Trending: XLI, XLE, XLU, XLB, XLK Futures are up in the early Tuesday morning hours: DJIA +130...S&P +19...Nasdaq +19...RUT +9 It is a long standing observation that there are two things that Wall Street (big money) doesn't like. One is negative surprises and the other is uncertainty. Well today we saw the continuing drama that has been unfolding since last Monday when it became apparent that there would be some negotiating that needed to take place before Congress would approve the request for $700 billion for a lifeline to the financial sector. Wall St. waited patiently last week and when the House bill failed today...Wall St. sold in a big way. The markets broke support and the rest is now history. From a practical point of view it still doesn't seem to be if, but rather when will Congress act. Until they do, the markets showed us today that we can expect volatility to be high. Monday was the largest point drop in history for the Dow. Obviously failure to pass a financial rescue bill was the primary catalyst for the selling spree. We suspect that much of the selling was computer programs that sell when markets reach certain key levels.

Using stops likely paid off on Monday and bearish strategies worked even better in most stocks.

The financial stocks short ban runs to October 2, unless it is extended. There were actually a few stocks that were not in the soup today...here are two to look at their charts: CPB, AITP HANS fell through it breakout support to its 20 and 30 DMA where buyers stepped in...looking like a potential bull flag pattern. KRE fell to its 50 DMA where buyers moved in and the ETF rose $2.50 from its intra-day low. NTRI bull flag support bounce failed on Tuesday and it formed a new low day...watch for potential bounce in this bull flag. Index Commentary The DJIA, SPX and Nasdaq closed below the Sep 18 low...the middle of Monday's large black candle is R1 and any rally will need to break this short-term resistance...Monday was a new 52-week low. The RUT fell to its 650 support zone where it previous found support in January, March and July...continues to hold above support...Monday's R1 level is the short-term horizontal resistance. Monday’s Action Moving Up: None in Watchlist Moving Down: BIDU, FSLR, CLF, DECK, GS, MA, POT, X, ANR, MOS, CNX, AGU, SCHN, MON, PCLN, BTU, NUE, MEE, FWLT, ZION, ESRX, STRA, RF, KBE, SOHU, CF, AMZN, DRYS, NIHD, BUCY, LDK, MER, INFY, V, FMCN, LAMR, KMT, EBAY, EXPE, COH, JASO, BRCM, ONXX, MS, SINA, GRMN, GDX, AEM, IPI, NDAQ, HANS, DRE, PNRA, UAUA Intermediate Term Market Trend: Down Short Term Market Trend: Down