DJIA, SPX, NASDAQ & RUT All Close Above 20 DMA

DJIA + 144.32, +1.57% SP500 + 14.66, +1.54% NASDAQ Comp. + 22.43, +1.32% Russell 2000 + 23.34, +4.54% Exchange NYSE NASD Advancing 2,512 2,223 Declining 938 702 Oil $67.81 +$1.85 Gold $718.20 -$20.30 $SOX 239.47 +4.41 Strongest Sectors: XLF +4.86%...XLY +4.08%...XLI +3.32% Weakest Sectors: XLU -2.66%...XLP -0.62%...XLK -0.60% Sector Watch Up Trending: Sideways: Down Trending: XLP, XLF, XLY, XLV, XLI, XLE, XLU, XLB, XLK If you have been listening to any of our audio commentaries or reading our posts since October 10, you know that we have been thorough in pointing out the technical evidence which began appearing on the charts on October 10 that the down trend could be coming to an end. New technical evidence today shows the DJIA, SPX, Nasdaq and RUT all closed above their respective 20 DMA on Friday. The DJIA had its first two consecutive up days, Thursday and Friday, since September 25 and 26. The Nasdaq had its first four consecutive up days, Tuesday to Friday, since May 27 to 30. Also, have you noticed that the RUT was up 4.5% a day on Thursday and Friday. This is a strong indication that the flight to safety action (selling smaller stocks and buying more mature stocks) during the month of October is shifting back to a more broad based acquistion of stocks by the big money crowd. As we stated Thursday evening what this means is that buyers are becoming more aggressive and sellers are becoming less aggressive. The markets will still fluctuate, at some point the rally of this week will exhaust and the markets will pull back to support. If the next pull back to support is a higher low, that will be further technical evidence of a changing trend. The market still needs to form both a higher high, above the October 14 high, and a higher low to establish a new up trend. The Financial Sector, XLF, +4.86%, was once again the top sector on Friday Friday’s Action Moving Up: STRA, MA, DECK, ESRX, CF, NIHD, DRYS, MEE, PNRA, ZION, KRE, UAUA, KBE, NDAQ, NUE, MOS, GS, MS, SOHU, ONXX, V, COH, MER, BTU, IPI, LCC Moving Down: BIDU, PCLN, AEM, X, GRMN, AGU, GDX, Intermediate Term Market Trend: Dow Short Term Market Trend: Up

Braod Rally...Narrow Range

DJIA + 189.73, +2.11% SP500 + 24.00, +2.58% NASDAQ Comp. + 41.31, +2.49% Russell 2000 + 23.30, +4.75% Exchange NYSE NASD Advancing 2,747 2,148 Declining 668 756 Oil $65.96 -$1.54 Gold $738.50 -$15.50 $SOX 235.06 +9.12 Strongest Sectors: XLU +5.58%...XLE +4.61%...XLP +4.21% Weakest Sectors: XLV +2.35%...XLY +3.03%...XLB +3.14% Sector Watch Up Trending: Sideways: Down Trending: XLP, XLF, XLY, XLV, XLI, XLE, XLU, XLB, XLK All nine sectors moved higher on Thursday showing the breadth of Thursday's rally. The daily range was modest 289 points compared with recent daily trading range. 79% of NYSE stocks and 72% of Nasdaq stocks moved higher. What was impressive about Thursday's rally was for the first time since October 10, buyers were in control on the second day after a large market rise. The prior two rallies on October 12 and October were followed by sell offs the second day after that had taken back most of the gains. Not so today. That does not mean that sellers won't gain control in the area of resistance, rather it show that sellere were not as agrressive and buyer were more aggressive this time around as the DJIA nears the horizontal resistance. Index Commentary The DJIA and the SPX formed an inside day white candle and closing above their 20 DMA for the first time in weeks. The Nasdaq rose to its DMA and formed a doji with a higher high and higher low compared with Wednesday, closed just below its 20 DMA. The RUT did not confirm Wednesday’s shooting star…rather it gapped open and moved higher through out the day closing at its high for the day. Watch Thursday's low on each index as the key short term support area. Thursday’s Action Moving Up: FSLR, STRA, ESRX, CF, DECK, V, MA, FWLT, MOS, AGU, CNX, IPI, X, NUE, BUCY, FMCN, UAUA, HANS, KRE, PNRA, ANR, AEM, BTU, GRMN, MS, MON, SCHN, DRYS, NIHD, BIDU, INFY, KMT, LDK, ONXX, COH, BRCM, GDX, LCC, NDAQ Moving Down: GS, EXPE Intermediate Term Market Trend: Down Short Term Market Trend: Up

Fed Lowers Rates 1/2%...Dollar Falls...Oil & Gold Rise

DJIA - 74.16, -0.82% SP500 - 10.42, -1.11% NASDAQ Comp. + 7.74, +0.47% Russell 2000 + 8.33, +1.73% Exchange NYSE NASD Advancing 2,216 1,705 Declining 1,224 1,183 Oil $67.50 +$4.77 Gold $754.00 +$13.50 $SOX 225.94 -6.47 Strongest Sectors: XLB +4.11%...XLE +2.21%...XLY +2.05% Weakest Sectors: XLF -6.16%...XLK -3.88...XLU -3.20% Sector Watch Up Trending: Sideways: Down Trending: XLP, XLF, XLY, XLV, XLI, XLE, XLU, XLB, XLK After the second largest one day DJIA point gain in history on Tuesday, a 10.88% gain, a pullback of 0.82% on Wednesday was a very modest pullback. The SPX gave back a small part of Tuesday’s while both the Nasdaq Composite and RUT rose for the second day in a row. The Fed lowered the Fed Funds rate by ½% that sent stocks gyrating up and down before closing down slightly for the day. In response the dollar fell against other currencies and the price of oil and gold rose. XLF fell 6.16% on Wednesday after rising 15.71% on Tuesday going from Tuesday’s largest sector gain to Wednesday largest sector loss. XLF and XLB rose to their 20 DMA and then pulled back to close below their 20 DMA. The seven other sectors XLP, XLY, XLV, XLI, XLE, XLU and XLK all moved above their 20 DMA only to see sellers push prices lower to close below their 20 DMA. The current price action on these nine sectors may be further technical evidence that the downtrend is in process of shifting from down to sideways. Several leading stocks like AMGN, BA, CB, MMM and TRV have closed above or near their 30 DMA. Remember that stocks are still consolidating between support and resistance and if this is the bottom, as the growing technical evidence since October 10 has been indicating, it could still take anywhere between one and half to five and a half weeks before a clear uptrend reemerges in the broad indices. Which means expect short term moves up and down to continue as the norm…after all that’s what sideways trends do.

Check the charts of our Daily Action Watchlist below for either trend reversal moves or bear flag opportunities.

Index Commentary The DJIA penetrated its 20 DMA and then sold off to close below its 20 DMA…formed a shooting star and bearish harami…watch the S1 level of Tuesday’s large white candle. The SPX moved above and then closed below its 20 DMA…formed a shooting star and bearish harami…watch the S1 support level of Tuesday’s large white candle. The Nasdaq rose to its 20 DMA and closed down from its high and formed a white spinning top. e bottom. The RUT formed a white shooting star as it had the largest percentage gain for the day of the four broad indices. Wednesday’s Action Moving Up: POT, MON, ANR, AGU, CNX, GS, STRA, MOS, BTU, PCLN, AEM, MEE, GDX, BIDU, NIHD, LAMR, FSLR, FMCN, KMT, DRYS, FWLT, SINA, SCHN, IPI, PNRA, NDAQ, LDK, DECK, BUCY, SOHU, AMZN, V Moving Down: ESRX, UAUA, KBE, CLF, BRCM, COH, EBAY Intermediate Term Market Trend: Down Short Term Market Trend: Neutral

Second Largest DJIA Point Gain In History...And From Support...

DJIA + 889.35, +10.88% SP500 + 91.59, +10.79% NASDAQ Comp. + 143.57, +9.53% Russell 2000 + 34.15, +7.62% Exchange NYSE NASD Advancing 2,741 2,047 Declining 727 888 Oil $62.73 -$0.49 Gold $740.50 -$2.40 $SOX 232.41 +19.84 Strongest Sectors: XLF +15.71%...XLE +15.25%...XLK +13.90% Weakest Sectors: XLV +6.30%...XLP +6.89...XLY +9.78% Sector Watch Up Trending: Sideways: Down Trending: XLP, XLF, XLY, XLV, XLI, XLE, XLU, XLB, XLK Second Largest DJIA Point Gain In History...And From Support...Is that really possible? Does support really have meaning in largest bear market since 1974? While the magnitude of buying can not be predicted from day to day, today's price action is certainly consistent with the price action of the past 13 trading day. The October 10 intra-day low was 7,882.51. Monday’s low was 8,143.59. That is a difference of 261 points. Today we stumbled across a notable newsletter writer that we have known of for approximately two decades. This writer has historically not been a technician but wrote just yesterday on October 27 “the Dow’s Oct. 10 lows have been decisively broken.” I fault no one for their opinion. But I am embarrassed for another individual when they comment beyond their expertise and have compassion for anyone who read their comments and sold out on Monday or Tuesday because of them. Support is not a specific price but an area or zone of support and an intra-day low 261 points above the cited intra-day low is not “decisively broken.” These type of comments mislead readers and can hurt real people financially. Let’s clarify. In an actively traded stock or index the actual low, not the closing low, is the specific area where buyers stepped in and became stronger than sellers. The close is the price those buyers were able to drive the stock or index to by the end of the day. The intra-day low was the epicenter of support. The DJIA has approached or traded in the area of the October 10 low six times; Oct. 16, 22, 23, 24, 27 and today October 28. ALL SIX TIMES buyer have been present and support held. Dave's Insight: There are big money buyers in the 7,882 to 8,143 area of the DJIA. That of course does not mean that this support area can not be broken, however, for the past 13 trading days they have stepped up and become buyers in this area which suggests unless some new and significant negative surprises unfold that they are likely to continue to be buyers in this area of support. On October 10 we posted in this blog “does this finally mark the beginning of the end of down trend?” Since that time we have fairly represented that bottoms can only be identified after it becomes fact, but that price action characteristics of bottoms can identified while a potential bottom is in process of forming. We have also fairly represented those bottoming characteristics that we have seen. Dave’s Insight: Don’t listen to technical insights from individuals who are not technical experts. That said, even with the second biggest daily point gain in history, the technical evidence does not yet support the idea that this basing action is over and a new uptrend is a foregone conclusion. Technically, a higher high than the October 14 high and a higher low above the Monday’s low needs to appear for confirmation of a trend reversal. Interestingly enough the 30 DMA is now at the level of the October 14 high. Also if the price action continues in the range since the October 10 low, volatility which has been flattening for the past 13 trading days should begin to fall more aggressively. All nine sectors moved higher with counter trend support bounces, several of of which have trend reversal characteristics. Oil fell further on Tuesday in the open outcry session which closes at 2:30 ET. In electronic trading after the 2:30 close oil rose $3.19. Airline stocks LCC, UAUA and CAL moved higher with falling oil prices. Leading stocks AMGN, CB and MMM moved higher and TRV formed a hammer with a support bounce off its 20 DMA. Index Commentary The DJIA bounced off support with power forming a bullish engulfing pattern and last Thursday’s bullish harami…closed near its 20 DMA first time since late September…formed a bullish divergence off its potential double bottom. The SPX bounced off support with a bullish engulfing pattern…confirmed last Thursday’s bullish engulfing and Friday’s hammer-like pattern…formed a bullish divergence in the MACD off its potential double bottom. The Nasdaq formed a large white candle that confirmed Friday’s inverted hammer and bullish engulfing pattern…with a bullish divergence in the MACD off a lower low. The RUT forms a bullish engulfing pattern off a lower low while forming a bullish divergence in the MACD. Stock Commentary Look at the Bollinger Band Hook in these Dow stocks: AA, AXP, BA, CVX, DIS, GE, HD, IBM, INTC and KFT...further evidence of a potential end to the down trend. Semiconductors stocks TXN, STM and TSM part of the SOX index were strong again today. Tuesday’s Action Moving Up: BIDU, MON, MA, STRA, SOHU, CF, CLF, AMZN, FLSR, POTS, SINA, NUE, X, PCLN, MOS ANR, AGU, SCHN, ESRX, KBE, HANS, INFY, V, COH, NIHD, FMCN, MER, BUCY, PNRA, KRE, NDAQ,ZION, AEM, BTU, GDX, CNX, MEE, FWLT, MS, GRMN, RF, UAUA, KMT, ONXX, EXPE, BRCM, EBAY, LDK, IPI, Moving Down: DECK Intermediate Term Market Trend: Down Short Term Market Trend: Neutral

Stocks Hit New Closing Lows

DJIA - 203.18, -2.42% SP500 - 27.85, -3.18% NASDAQ Comp. - 46.13, -2.97% Russell 2000 - 22.72, -4.82% Exchange NYSE NASD Advancing 730 634 Declining 2,727 2,233 Oil $63.22 -$0.93 Gold $742.90 +$12.60 $SOX 212.57 +0.24 Strongest Sectors: XLY -1.49%...XLK -2.06%...XLP -2.54% Weakest Sectors: XLB -7.42%...XLE -6.39%...XLV -4.28% Sector Watch Up Trending: Sideways: Down Trending: XLP, XLF, XLY, XLV, XLI, XLE, XLU, XLB, XLK The DJIA opened lower rallied until 1:40 ET and then sold off to close at its low of the day and a new 52-week but still above the intra-day low on October 10. It is still in the zone of support but approaching the low end. All nine sectors continue their respective downtrends and were lower on Monday.

Watch the October 10 close in the DJIA as a key support area. Trade with the trend.

Oil continued to move lower in its downtrend and gold rose for the second day in a row although gold stocks moved lower. The SOX Semiconductor Index actually rose slightly on Monday. Index Commentary The DJIA The SPX The Nasdaq makes a new 52-week closing low…forms inverted hammer and bullish harami. The RUT forms large black candle closes at a new 52-week low. Monday’s Action Moving Up: STRA, ZION, RF, CF, BRCM Moving Down: FSLR, BIDU, GS, POT, AEM, MA, ESRX, X, CNX, ANR, BTU, NUE, MS, PCLN, ONXX, CLF, DRYS, SOHU, COH, V, AGU, SINA, FWLT, SCHN, GDX, MOS, MEE, GRMN, NDAQ, BUCY, LKD, KMT, INFY, FMCN, LAMR, MON, PNRA, LCC, Intermediate Term Market Trend: Down Short Term Market Trend: Down

Reversal Trading Strategy

We mentioned on Thursday that we would post the guidelines to this strategy over the weekend. This strategy may not be appropriate for non-technical traders and only traders who can assume the risk of trading against the prior trend should consider trading this technique. Anyone who finds this strategy of interest should first backtest and papertrade it on stocks they trade to verify the strategy's appropriateness for them. Chart Signals and Dave Johnson offer these guidelines only as an illustration of how technical indicators can be combined into a set of rules for a trend reversal strategy and make no representations regarding the profitability or completeness of the following guidelines and are not liable for any losses traders may incur. Individuals traders assume all liability for any losses they may incur. Reversal Trading Strategy Overview The objective of this short term trading system is to identify high probability reversal points by combining potential double bottom or slightly lower low or a double top or slightly higher high chart patterns with short term candlestick reversal patterns and a negative/positive divergence in the stochastic indicator (14/5 setting). An eight day MA is included primarily as an exit/trailing stop indicator, but also gives the user a smoothed view of the short term trend. Rules Setup Entry: 1 - There must be a double bottom or slightly lower low chart pattern for an upside reversal. For downside reversal there must be a double top or slightly higher high chart pattern. 2 - There must be a bottom/top candlestick reversal pattern present on the second high. 3 - There must be a positive divergence for an upside reversal and a negative divergence for a downside reversal in the stochastic indicator. Buy Signal: Buy on confirmation of the candlestick pattern. Exit: 4 - Initial stop loss is set 20 cents below the low of the candle pattern for an upside reversal and 20 cents above the high of the candle pattern for a downside reversal. 5 - Once the trade produces a profit of $1.00, stop loss is moved to breakeven (the entry price). 6 - Once the eight day MA moves past the breakeven point the eight day MA becomes the trailing stop. The trailing stop is the Target Price.

OPEC Cuts 1.5 Million BPD...Oil Prices...Stocks Fall

DJIA - 312.30, -3.59% SP500 - 31.34, -3.45% NASDAQ Comp. - 51.88, -3.23% Russell 2000 - 18.80, -3.84% Exchange NYSE NASD Advancing 638 633 Declining 2,830 2,249 Oil $64.15 -$3.69 Gold $730.30 +$15.60 $SOX 212.33 -2.03 Strongest Sectors: XLV -0.35%...XLU -2.66%...XLB -4.30% Weakest Sectors: XLF -6.49%...XLE -6.23%...XLI -5.76% Sector Watch Up Trending: Sideways: Down Trending: XLP, XLF, XLY, XLV, XLI, XLE, XLU, XLB, XLK OPEC held their emergency meeting on Friday and agree to cut production by 1.5 million bpd. And of course oil price…fell. That’s right we said…fell. This is another example of how economic announcements seldom have the ability to change the intermediate term trend. With the intermediate term trend in oil prices being driven by falling demand and global economic weakness the short-term news of reduced production at least on Friday was not enough to reverse the trend. We won’t take the time to elaborate now but we have stated for more than a year that we felt that oil prices over 50 to 60 a barrel had more to do with geopolitical fears than fundamental supply/demand issues. In general stocks including commodity related stocks moved lower on Friday. Gold stocks like GDX, AEM, GG and GOLD moved higher in a counter trend support bounce with the price of gold. All nine sectors moved lower on Friday. On Friday the DJIA, SPX and RUT stayed above or bounced at recent short-term support levels established since October 10. The Nasdaq established a new intra-day and closing low on Friday. Stay focused on these key support levels. While we expect consolidation to continue in the market for the near term we will stay alert for a potential support break. Traders must stay focused on what the market does and trade the market. Index Commentary The DJIA found support at 8,187 and rallied to form a black candle with a lower shadow…failed to confirm Thursday’s bullish harami. The SPX found support at 852 and rallied to form a hammer like candle with a lower shadow…there was no confirmation of Thursday’s bullish harami. The Nasdaq opened to new 52-week low and rallied but still closed at a new 52-week closing low. The RUT gapped open near its October 10 low and formed a spinning top at a new 52-week closing low. Friday’s Action Moving Up: STRA, AEM, NUE, LCC, ZION Moving Down: BIDU, GS, MA, DECK, SOHU, FSLR, CLF, BUCY, MON, ANR, ESRX, HANS, NDAQ, KBE, KRE, MS, MEE, SINA, MOS, MER, KMT, COH, AMZN, DRYS, LAMR, FMCN, BTU, X, IPI, FWLT, CNX, PNTRA, RF Intermediate Term Market Trend: Down Short Term Market Trend: Down

Another Volatile Rebound in the DJIA and S&P

DJIA + 172.04, +2.02% SP500 + 11.33, +1.26% NASDAQ Comp. - 11.84, -0.73% Russell 2000 - 12.05, -2.40% Exchange NYSE NASD Advancing 1,292 824 Declining 2,152 2,032 Oil $67.84 +$1.09 Gold $714.70 -$20.50 $SOX 216.72 -2.98 Strongest Sectors: XLE +5.32%...XLU -2.39%...XLK -2.27% Weakest Sectors: XLV -2.31%...XLB -2.29%...XLF -1.02% Sector Watch Up Trending: Sideways: Down Trending: XLP, XLF, XLY, XLV, XLI, XLE, XLU, XLB, XLK Oil prices rebounded on Thursday in front of the OPEC emergency meeting on Friday. Airline stocks fell as a result. In general commodity related stocks like coal, gold, steel and Ag-related stocks did not participate in the rally. Oil stocks did have big moves today. XLE, +5.32% was the strongest sector. Oil stocks HES, XOM, OXY, CVX, APA, XTO, MRO, HAL, NOV and NE did even better. OPEC will hold its emergency meeting on Friday and it will be of great interest to see if they will cut production and if doing so can actually change the intermediate term down trend. Oil must make a higher low and higher to reverse. Our best sense is that it will be challenge to reverse the intermediate term down trend in oil prices with the drop in demand from economic softening. Five sectors XLE, XLU, XLK, XLP and XLI moved higher, XLY was unchanged while XLF, XLB and XLV moved lower. On Thursday the major indices stayed above or bounced at recent short-term support levels established on October 10 and 16. Stay focused on these key support levels. The past two week are moving in a sideways consolidation area so a support bounce is the most probable outcome. This is what happened Thursday in the DJIA and SPX. We expect consolidation to continue in the market for the near term and will stay alert for a potential support break. Traders must stay focused on what the market does and trade the actual market action. Index Commentary The DJIA found support at 8,243 and rallied to form a bullish harami…watch for confirmation. The SPX found support at 858 and rallied to form a hammer and bullish harami…watch for confirmation. The Nasdaq intra-day hit a new 52-week low about 8 points below its October 10 low before rallying to form a black hammer . The RUT fell to its October 10 low and rallied to form a black hammer like candle…forming a potential double bottom. Stock Commentary DECK fell to its recent support low with the potential to form a double bottom if support holds…after the close reported $1.97 earnings higher than the estimate of $1.85. AAPL formed a hammer…watch for a break of the high of the low day. BIDU broke the low of the high day and dropped 14% after reporting earnings of $1.47 above estimates of $1.28 Wednesday after the close. ORCL moved down from yesterday’s shooting star before finding support and forming a doji. WYNN another 52-week low SHLD another 52-week low CTSH fell continued its move down from resistance and formed a black hammer. HANS formed another spinning top in sideways consolidation. C formed a black hammer around the October 10 S1 level. Wednesday’s Action Moving Up: POT, BUCY, BRCM Moving Down: BIDU, FSLR, STRA, GS, MA, CF, DECK, SOHU, CLF, NIHD, MON, MOS, PCLN, BTU, FWLT, AGU, AEM PNRA, UAUA, ZION, LCC, KRE, CNX, LDK, DRYS, ONXX, JASO, KMT, LAMR, SINA, SCHN, MS, GDX, MEE, RF, ESRX, Intermediate Term Market Trend: Down Short Term Market Trend: Neutral

Oil and Gold Drop...Stocks Fall...Holding Above Support

DJIA - 514.45, -5.69% SP500 - 58.27, -6.10% NASDAQ Comp. - 80.93, -4.77% Russell 2000 - 28.68, -5.40% Exchange NYSE NASD Advancing 536 422 Declining 2,936 2,453 Oil $67.25 -$5.43 Gold $735.20 -$32.80 $SOX 219.70 -14.39 Strongest Sectors: XLP -1.57%...XLV -2.48%...XLU -4.24% Weakest Sectors: XLE -9.72%...XLY -6.83%...XLF -6.27% Sector Watch Up Trending: Sideways: Down Trending: XLP, XLF, XLY, XLV, XLI, XLE, XLU, XLB, XLK Oil prices fell again on Monday to a new 52-week low and their lowest levels since the first half of 2007. This led to another rise in airline stocks which pulled back from their highs with the broad sell off later in the day. Leading commodity related energy, solar, coal, gold, steel and Ag-related stocks fell as much as 25%. AEM fell $8.70 or 25.16%. This large drop in oil price is right before OPEC’s emergency meeting on October 24 to call for a cut in production. It will be interesting to see how lower prices influence discussions come Friday. All sectors moved lower again on Wednesday. All sectors moved lower again on Wednesday. Stocks were lower due to stocks like BA and T with disappointing earnings and concerns over a global recession. AAPL rose on Wednesday due to a positive earnings report. The major indices stayed above recent short-term support levels established on October 10 and 16. Stay focused on these key support levels. Notable Earnings scheduled for Thursday: AAI, ALK, BDK, BMY, CELG, CNX, DO, DOW, LLY, F, ESI, JBLU, LLL, MBI, NOV, POT, RTN, STI, UNP, BUCY, BNI, DECK, JNPR, WFR, MSFT, WDC, YRCW Index Commentary The DJIA formed a large black candle with a lower shadow…held above last Thursday’s low. The SPX confirmed Tuesday’s bearish harami…above Thursday’s low…in sideways congestion. The Nasdaq opened lower and closed near Thursday’s low…broke 3-day pennant pattern to the downside…continues in a sideways consolidation pattern. The RUT broke 3-day pennant pattern to the downside…closed above Thursday’s low…consolidating in a potential W pattern. After-Hours Trading on Earnings: AMZN down $7 on outlook AMGN rose $2 on positive earnings BIDU fell $7 FFIV up 7.65% on positive earnings CNW rose $1 on positive earnings Stock Commentary DECK broke the pennant and low of the high day…earnings on Thursday. AAPL moved higher after earnings Tuesday evening. BIDU formed spinning top…Wednesday after close…trading lower after hours. ORCL confirmed shooting star and bearish harami…broke the low of the high day. WYNN new closing low SHLD another 52-week low CTSH fell below the low of the high day today. HANS formed a spinning top in sideways consolidation. C fell to the October 10 S1 level. Wednesday’s Action Moving Up: PNRA, BRCM, UAUA Moving Down: DECK, MA, AEM, ANR, CNX, STRA, MON, X, GS, POT, SOHU, CLF, MEE, MOS, AGU, FWLT, BTU, SCHN, GDX, PCLN, FSLR, FMCN, DRYS, KMT, V, IPI, ESRX, NDAQ, KRE, KBE, GRMN, NUE, SINA, MS, LAMR, COH, ONXX, MER, LDK, INFY, JASO, HANS Intermediate Term Market Trend: Down Short Term Market Trend: Neutral

Oil Continues Down Trend as Stocks Continue to Consolidate...

DJIA - 231.77, -2.50% SP500 - 30.35, -3.08% NASDAQ Comp. - 73.35, -4.14% Russell 2000 - 16.19, -2.96% Exchange NYSE NASD Advancing 1,013 832 Declining 2,430 2,059 Oil $70.89 -$3.36 Gold $768.00 -$22.00 $SOX 234.09 -9.83 Strongest Sectors: XLV -0.29%...XLI -0.89%...XLP -0.94% Weakest Sectors: XLK -5.23%...XLE -4.54%...XLB -4.21% Sector Watch Up Trending: Sideways: Down Trending: XLP, XLF, XLY, XLV, XLI, XLE, XLU, XLB, XLK Oil prices fell again on Monday fueling a rise in airline stocks but leading commodity related energy, solar, coal, gold, steel and Ag-related stocks. We re-mentioned airline stocks AMR, CAL, DAL, LCC and UAUA last week in our audio commentary Thursday morning and warned yesterday not to lose focus on oil’s down trend. We were asked last night if oil was still in a down trend in face of OPEC’s emergency meeting on October 24 to call for a cut in oil production. We responded with an emphatic “yes, oil is still in a down trend until we see a higher high and a higher low." We also said we expected that the bounce in commodity related stocks on Monday was more likely a bear flag counter trend bounce and to watch for bearish entry opportunities if oil prices moved down. Many of those stocks gave bearish entry opportunities today. All sectors moved lower on Tuesday. The overall market continues in a consolidation pattern which we noted on October 10 could be the beginning of the end of the down trend. We remind everyone that consolidation base building periods after deep sell offs generally take several weeks before a clear up trend is established. So Tuesday’s action is totally consistent with what is typical. If you are uncertain about how bottoms consolidate go back and study the many bottoms that have occurred during the past several years. Earnings reports continue this week. Index Commentary The DJIA barely moved above Friday’s high and then moved lower closing in the area of Monday’s S1 level…continues in sideways congestion. The SPX barely moved above Monday’s high and moved lower closing below the area of Monday’s S1 and above S2…continues in a sideways congestion. The Nasdaq opened lower and closed near Monday’s low…Friday through Tuesday is forming a pennant pattern…continues in a sideways consolidation pattern. The RUT did not trade above Monday’s high and moved lower forming and inside day…Friday through Tuesday is forming a pennant pattern…consolidating in a potential W pattern. Stock Commentary DECK formed another inside day…pennant forming since Friday. AAPL formed did not confirm Monday’s hammer…moved lower on 55 million shares. BIDU formed doji and a potential bearish harami…earning tomorrow 10/22. ORCL formed shooting star…potential bearish harami. WYNN confirmed Monday’s dark cloud cover and bear flag break on Tuesday. SHLD fell to a new 52-week low. CTSH fell to Monday’s low…watch for a move below the low of the high day which was Monday. HANS rose to 30 DMA and fell…formed shooting star and potential bearish harami. C failed to confirm Monday’s bullish harami…moved lower. Tuesday’s Action Moving Up: COH, UAUA Moving Down: POT, BIDU, CF, AEM, MON, AGU, CNX, X, NIHD, FSLR, AMZN, DRYS, CLF, PCLN, ANR, GDX, MOS, IPI, SINA, ESRX, FMCN, LDK, INFY, DECK, V, BUCY, ZION, KRE, HANS, SCHN, GRMN, BTU, MEE, NUE, FWLT, PNRA, BUCY Intermediate Term Market Trend: Down Short Term Market Trend: Neutral

Markets Rise on Inside Day Pattern and Bullish Harami Confirmation

DJIA + 413.21, +4.67% SP500 + 44.85, +4.77% NASDAQ Comp. + 58.74, +3.43% Russell 2000 + 20.41, +3.88% Exchange NYSE NASD Advancing 2,909 2,164 Declining 572 753 Oil $75.32 +$2.40 Gold $790.00 +$2.30 $SOX 243.92 +4.79 Strongest Sectors: XLE +11.65%...XLU +8.43%...XLB +5.05% Weakest Sectors: XLY +0.54%...XLP +0.82%...XLK +3.99% Sector Watch Up Trending: Sideways: Down Trending: XLP, XLF, XLY, XLV, XLI, XLE, XLU, XLB, XLK Markets rose big on Monday, primarily back to Friday's highs. 82% of the stocks on the NYSE and 72% on the Nasdaq rose. All nine sectors ETFs moved higher on Monday. The DJIA, Nasdaq and RUT formed inside days. Only the SPX closed higher than Friday's high. This however is good news as buyers were not overwhelmed by sellers as they were late Friday. Yesterday, Sunday, October 19 was the 21st anniversary of the 1987 crash. No additional selloff on the 2008 Monday as a result. Earning releases continue this week. Oil rose on expectations of OPEC's October 24 emergency meeting would lead to production cuts. Oil, coal, gold, steel and Ag-related stocks rose in sympathy. Potential double bottom and W patterns exist on many of these charts. The price of oil here will be the key to whether these patterns will become reversal patterns or bear flag counter-trend moves. Look for higher lows and higher highs and confirmed breakouts. Otherwise look for potential bearish trades in these down trending stocks. Index Commentary The DJIA did confirm Thursday’s and Friday’s bullish harami on Monday…just barely an inside day closing at its high support…watch for a close above Wednesday’s high. The SPX confirmed Thursday’s bullish harami…Monday was a higher high and higher low. The Nasdaq confirmed Thursday’s and Friday’s bullish harami…and inside day…watch for a breakout of Friday’s high. The RUT confirmed Thursday’s and Friday’s bullish harami…an inside day…watch for a break above Friday’s high. Stock Commentary DECK formed an inside day. AAPL formed a hammer for the third day in a row and a hammer on 55 million shares. BIDU moved up continuing it support bounce. ORCL closed above Friday’s high with a large white candle. WYNN failed to follow through on its counter-trend support bounce forming a large black candle. SHLD fell to a new low in its down trend. CTSH moved higher following Friday’s bullish engulfing pattern…still looking like a potential W bottom. HANS broke through Friday’s inside day high and the high of the low day on Thursday…looks like a potential W pattern bottom. C formed a bullish harami…still forming a potential higher low W bottom. Monday’s Action Moving Up: BIDU, MON, BTU, GS, CLF, STRA, SOHU, CNX, ANR, POT, MOS, NUE, NDAQ, AGU, MEE, NIHD, DRYS, X, AEM FWLT, SCHN, LDK, CF, AMZN, BUCY, FSLR, HANS, GDX, IPI, PCLN, INFY, MER, ONXX, GRMN, ESRX Moving Down: MA, ZION Intermediate Term Market Trend: Down Short Term Market Trend: Neutral

Markets Rise and Pull Back on Options Expiration Friday

DJIA - 127.04, -1.41% SP500 - 5.88, -0.62% NASDAQ Comp. - 6.42, -0.37% Russell 2000 - 10.14, -1.89% Exchange NYSE NASD Advancing 1,904 1,276 Declining 1,546 1,615 Oil $71.85 +$2.00 Gold $787.70 -$16.80 $SOX 239.13 -4.76 Strongest Sectors: XLB +2.67%...XLE +2.20%...XLY +2.02% Weakest Sectors: XLF -2.85%...XLI -2.16%...XLK -0.96% Sector Watch Up Trending: Sideways: Down Trending: XLP, XLF, XLY, XLV, XLI, XLE, XLU, XLB, XLK Last Friday we posed the question, “Beginning of the End?” One week later what has occurred on the chart? - The market rallied and pulled back to a higher low on Thursday. - Today was a higher high and higher low even though the indices were down from yesterday. - Today was the smallest trading range day of the last seven trading days. - During the past week the short-term trend has shifted from down to sideways. - The DJIA rose 4.7%, the SPX rose 4.5%, the Nasdaq rose 3.7%, the RUT rose 0.7%. - Big money buyers again bought near the same horizontal support level as last Friday. As we stated last week a bottom can only be identified once it has occurred and is a historical fact. Generally major sell offs will take several weeks to build a base which is where buyers and sellers trade through a continually shifting battle before one of the groups emerges victorious and takes control of the trend. What can be observed based on the trading since last Friday is that so far the price action is acting like many bottoms in the past. A technical trend reversal signal needs at least a higher high above last Tuesday’s high to indicate potential trend reversal. If that occurs we may have a stronger sense that last Friday was indeed the beginning of the end. Q3 Earnings announcements continue on Monday. Index Commentary The DJIA did not confirm Thursday’s bullish harami…Friday was a higher low and higher high which held this week’s short-term support…watch for a close above Thursday’s high or an intra-day move above Friday’s high. The SPX formed a spinning top that barely missed confirming Thursday’s bullish harami…Friday was a higher high and higher low. The Nasdaq formed another bullish harami on Friday which did not confirm Thursday’s bullish harami…Friday did make a higher high and higher. The RUT formed a spinning top which is a bullish harami that did not confirm Thursday’s bullish harami…did also make a higher high and higher low. Stock Commentary DECK formed a higher high and higher low before closing down 62 cents.. AAPL formed a hammer for the second day in a row on 62 million shares. BIDU moved up after a strong earnings report from GOOG. ORCL barely confirmed Thursday’s bullish harami pattern. WYNN confirmed its bullish harami with a counter-trend support bounce. SHLD bounced slightly higher on Friday…still a down trend CTSH formed a bullish engulfing confirming Thursday’s bullish harami …still looking like a potential W bottom. HANS formed and inside day. C formed an inside day…still forming a potential higher low W bottom. Friday’s Action Moving Up: BIDU, SOHU, NIHD, NDAQ, BTU, PNRA, CNX, GS, ANR, NUE, DRYS, MON, UAUA, MEE, LKD, FWLT, CLF Moving Down: FSLR, ZION, KRE, PCLN, CF, V, X, IPI Intermediate Term Market Trend: Down Short Term Market Trend: Neutral

Bullish Harami...A Higher Low?

DJIA + 401.35, +4.68% SP500 + 38.59, +4.25% NASDAQ Comp. + 89.38, +5.49% Russell 2000 + 34.46, +6.86% Exchange NYSE NASD Advancing 2,187 1,973 Declining 1,297 947 Oil $69.85 -$4.69 Gold $804.50 -$34.50 $SOX 243.89 +10.30 Strongest Sectors: XLY +6.60%...XLK +5.23%...XLV +5.22% Weakest Sectors: XLB +0.89%...XLP +0.96%...XLI +2.03% Sector Watch Up Trending: Sideways: Down Trending: XLP, XLF, XLY, XLV, XLI, XLE, XLU, XLB, XLK Thursday morning in our audio commentary we mentioned two industry indexes that looked more neutral to bullish that every other index; Airlines $XAL and Banks $BIX. We even showed charts on AMR, CAL, DAL, LCC and UAUA. We also mentioned how their fuel costs are falling as oil prices are falling. Later in the day as oil fell over $4 to a 14-month low the airlines took off in a big way: UAUA +40%, LCC +28%, AMR +23%, CAL +22%, DAL +18%. We also mentioned regional bank ETF KRE which finished +7%, bank ETF KBE +1.2% and regional banks ZION +6.9% and RF -1.8%. All 9 sector ETF’s were higher the exact opposite of Wednesday sector movement. XLF the strongest sector chart formed a hammer like candle and bullish harami candle pattern. The broad indices are still acting as if they are in a bottoming pattern forming higher than last Fridays low. This appears like a potential double bottom or W pattern bottom. As we have stated and posted recently, bottoms can only be identified once the pattern is formed and viewed after the fact, but we can observe that the current market action is acting consistent with the way a bottom performs while it is in the process of forming. Only time and price action will tell. The VIX did put in an intra-day higher high than last Friday’s high and managed to close lower than last Friday’s VIX close. This could be a bullish divergence (the VIX is an inverse index) since the VIX made a higher high while the SPX made a higher low. The intra-day swing from a record VIX reading of 81.17 to a close of 67.61 is a remarkable reversal of volatility in one day. Volatility is still extremely high so stay tuned. GOOG formed a double bottom support bounce…rose $13 on 16 million shares…rose almost $37 in after hours trading on almost 2 million shares after a positive earnings report. BIDU rose $28 in after hours trading after a positive earnings report from GOOG. IBM rose 3.6% and another 2.4% in after hours trading after a positive earnings report. ISRG rose 12.98% before the close with their earnings coming AMC. BK rose +6% after a positive earnings report this morning. Index Commentary The DJIA formed a bullish harami on a support bounce from a higher low…closed above Wednesday’s R1…today is the low day…watch for a break above today’s high. The SPX formed a bullish harami candle on a support bounce from a higher low the moved to the S1 level of Wednesday’s candle. The Nasdaq formed a bullish harami shaven head candle on a support bounce from a higher low. The RUT formed a bullish harami on a support bounce from a higher low that broke above Wednesday’s R1 level. Stock Commentary DECK formed an outside day on a support bounce from a higher low…resistance at 20 DMA. AAPL formed a hammer and bullish harami from a support bounce from a higher low on 70 million shares. BIDU moved down with a lower high and lower low. ORCL formed a bullish harami on a double bottom support bounce. WYNN formed a bullish harami. SHLD formed a lower high and lower low spinning top on a new intra-day low. CTSH formed a hammer and bullish harami on a support bounce from a higher low…a potential W bottom. HANS formed a lower low and lower high…an intra-day support bounce from a higher than last Friday’s low. C formed a spinning top with an intra-day support bounce forming a potential higher low W bottom. Thursday’s Action Moving Up: FSLR, STRA, DECK, ESRX, UAUA, ZION, KRE, LCC, NDAQ, ANR, BTU, NUE, X, MA, SCHN, CNX, MEE, GRMN, PCLN, AGU, SINA, CLF, V, CF, AMZN, KMT, INFY, COH, ONXX, EXPE, BRCM Moving Down: AEM, GDX, POT, HANS, IPI, BIDU, DRYS, MON, GS, MOS Intermediate Term Market Trend: Down Short Term Market Trend: Neutral

Second Largest Point Drop on New Uncertainty in Retail Sales

DJIA - 733.08, -7.87% SP500 - 90.17, -9.03% NASDAQ Comp. - 150.68, -8.47% Russell 2000 - 52.54, -9.47% Exchange NYSE NASD Advancing 381 423 Declining 3,125 2,482 Oil $73.42 -$1.12 Gold $839.00 -$0.50 $SOX 233.59 -22.81 Strongest Sectors: XLP -3.43%...XLU -7.44%...XLK -7.52% Weakest Sectors: XLE -14.44%...XLB -12.41%...XLY -11.62% Sector Watch Up Trending: Sideways: Down Trending: XLP, XLF, XLY, XLV, XLI, XLE, XLU, XLB, XLK The DJIA had its second largest point drop in history today falling 733 points. The decline was kicked off by a Commerce Department report that sales declined in September by 1.2%, larger that a forecast decline of 0.7%. In addition the NY Fed Bank Empire State Manufacturing Report dropped to a record -24.6% in September from a -7.4% in September. New negative surprises led to a renewed sell off. Remember “big money” doesn’t like two things; negative surprises and uncertainty. We hope you took to heart what we posted Tuesday: “Be mindful that many of the support bounces of the past two days are counter trend moves in intermediate term down trends…many can be described as bear flag patterns. Watch for weakness to break short-term support levels.” Oil continued its down trend falling another $1.12. Commodity related stocks…energy, coal, Ag-related, gold and steels all moved significantly lower on the day. moved lower in the direction of its intermediate term down trend and energy, coal, Ag-related and steel stocks moved lower, many forming bearish candle patterns. POT fell another 21%. All sectors including the Financial sector moved lower on Wednesday. XLF fell below its resistance at 16.60 to 15.45. JPM, WFC and KO reported stronger than expected earnings. WFC gave back its early gains to finish down 17 cents while KO gained 49 cents. Q3 Earnings releases continue…be aware of the earnings date for your holdings. Thursday October 16 Notable Earnings: BK, BAX, C, CAL, CY, HOG, MER, NUE, BTU, SHW, LUV, AMD, COF, GILD, GOOG, IBM, ISRG, SNDK, SYK, ZION. Index Commentary The DJIA dropped through the S1 level of Monday’s large white candle…closed above S2…a bear flag break. The SPX dropped below S1 and S2 of Monday’s large white candle…a bear flag break. The Nasdaq confirmed Tuesday’s dark cloud cover…fell below Monday’s S2m S3 and gap up and into Friday’s candle...a bear flag break. The RUT confirmed Tuesday’s dark cloud cover and closed below the S1, S2 and gap up of Monday’s large white candle and closed at the S1 of Friday’s large white candle...a bear flag break. Stock Commentary DECK moved down from its bearish engulfing pattern. AAPL moved down from its bearish engulfing pattern on 56 million shares BIDU moved down from its dark cloud cover pattern ORCL moved down from its dark cloud cover pattern WYNN fell to a new low after Tuesday’s outside day SHLD fell to a new low CTSH broke below the low of its high day on Tuesday HANS gapped up and then reversed forming a bearish engulfing like pattern C fell below the low of the high day on Tuesday Wednesday’s Action Moving Up: None in watchlist Moving Down: BIDU, POT, MA, STRA, FSLR, GS, MON, X, PCLN, ANR, NUE, CNX, BTU, AGU, MOS, ESRX, CLF, CF, V, AMZN, BUCY, SOHU, DECK, DRYS, NIHD, MER, INFY, COH, FMCN, FWLT, AEM, IPI, SHCN, MS, GRMN, MEE, GDX, SINA, NDAQ, PNRA, KRE, KBE, ZION, HANS, LDK, LAMR, KMT, EBAY, ONXX, BRC, EXPE, JASO Intermediate Term Market Trend: Down Short Term Market Trend: Down

Markets Pull Back After Historic Rise

DJIA - 76.62, -0.82% SP500 - 5.34, -0.53% NASDAQ Comp. - 65.24, -3.54% Russell 2000 - 16.24, -2.84% Exchange NYSE NASD Advancing 1,911 1,138 Declining 1,609 1,853 Oil $78.63 -2.56 Gold $839.50 -$3.00 $SOX 256.40 -13.51 Strongest Sectors: XLF +6.45%...XLV +2.03%...XLY +0.61% Weakest Sectors: XLK -3.38%...XLB -2.90%...XLU -0.83% Sector Watch Up Trending: Sideways: Down Trending: XLP, XLF, XLY, XLV, XLI, XLE, XLU, XLB, XLK The DJIA and SPX had modes pullbacks after Monday’s historic rise. The Nasdaq and RUT had more of a correction. Only nine of the NDX 100 rose on Tuesday. AAPL, MSFT, QCOM, GOOG, ORCL, RIMM, INTC, AMZN, CELG and CSCO were the major contributors to the weakness in the Nasdaq. Be mindful that many of the support bounces of the past two days are counter trend moves in intermediate term down trends…many can be described as bear flag patterns. Watch for weakness to break short-term support levels. Oil moved lower in the direction of its intermediate term down trend and energy, coal, Ag-related and steel stocks moved lower, many forming bearish candle patterns. The Financial sector was the big mover on Tuesday. XLF broke above its resistance at 16.60 with a 4% breakout. This is positive and consistent with our expectations and our recent audio commentaries. This is the first sector to move from its down trend back into its sideways trading range of July to August. We will move XLF to Sideways in the Sector Watch if Wednesday holds above the breakout. Notable financial stocks that contributed to Tuesday’s sector strength include: BAC +16%, WFC +10%, C +18%, GS +10%, BK +13%, AXP +3%, ZION +24% Q3 Earnings releases continue…be aware of the earnings date for your holdings. Wednesday October 15 Notable Earnings: AMR, BBT, BK, BAX, DAL, EBAY, HOG, MER, NVLS, NUE, LUV, STJ, STLD, XLNX Wednesday Regional Bank Earnings: CBSH, CTBI, WABC Index Commentary The DJIA formed a spinning top that traded above the S1 level of Monday’s large white candle. The SPX also formed a spinning top that traded above the S1 level of Monday’s large white candle. The Nasdaq formed a dark cloud cover after two up days…closed near the S1 level of Monday’s large white candle. The RUT formed a dark cloud cover and closed above the S1 level of Monday’s large white candle. Stock Commentary DECK formed a bearish engulfing pattern. AAPL formed a bearish engulfing pattern on 70 million shares BIDU formed a dark cloud cover pattern ORCL formed a dark cloud cover pattern WYNN closed lower forming an outside day SHLD falls to S1 of Friday’s piecing line pattern CTSH traded above Monday’s S1 level while pulling back HANS formed a black spinning top and closed just below its 50 DMA C gapped higher and closed above its 50 DMA Tuesday’s Action Moving Up: GS, ZION, AEM, MS, KBE, RF, KRE, PCLN, MER, DRYS, KMT Moving Down: BIDU, POT, NUE, DECK, AMZN, MOS, MON, ANR, X, BTU, MEE, AGU, SCHN, BUCY, CLF, NIHD, PNRA, STRA, CNX, SOHU, LAMR, ONXX, INFY, BRCM, V, JASO, LDK, FMCN, COH, EXPE, FSLR, GRMN, FWLT, ESRX, Intermediate Term Market Trend: Down Short Term Market Trend: Up

Largest Point Gain in History

DJIA + 936.42, +11.08% SP500 + 104.13, +11.58% NASDAQ Comp. + 194.74, +11.81% Russell 2000 + 48.41, +9.27% Exchange NYSE NASD Advancing 3,316 2,574 Declining 205 429 Oil $81.19 +$3.49 Gold $842.50 -$16.50 $SOX 269.91 +23.80 Strongest Sectors: XLE +16.47%...XLB +14.06%...XLU +12.07% Weakest Sectors: XLY +3.93%...XLP +4.66%...XLU +7.81% Sector Watch Up Trending: Sideways: Down Trending: XLP, XLF, XLY, XLV, XLI, XLE, XLU, XLB, XLK If you did not read last Friday’s post…consider going back and reading it now. Stocks had a record setting rally on Monday after European governments stated they would stand behind banks with unlimited funds and guarnatee loans. MS rose over 85% after Mitushishi UFJ Financial, MTU, $9 billion investment complete. Confidence in the financial is beginning to be restored. On Monday the DJIA set a new all-time record for the single-day point rise +936, +11.1%, and the highest percentage rise since March 15, 1933. We like several aspects of Monday’s historic rise: The point rise was more that any single day point drop over the past week. The biggest point drops since September 29 were -777, -679 and -508. The advancers were 94% on the NYSE and 84% on the Nasdaq. Friday’s DJIA sell off and intra-day rally were on 77% above average volume. Monday’s historic rise was on 5% above average volume…the insight…sellers were exhausted on Friday.

The Financial Sector, XLF, stocks moved on Monday including after hours trading JPM, BAC, WFC, C, USB, BK, CME, MER, ICE, MS Ultra Financial ETF = UYG Q3 Earnings releases start NOW…be mindful of this in any trading you consider. Tuesday October 14 Notable Earnings: ABT, ALTR, CSX, DNA, INTC, JPM, JNJ, LLTC, PEP, UB, USNA, WFC Tuesday Regional Bank Earnings: OZRK, CBC, CNBKA, ECBE, FSBK, IBCA, MBWM, PACW, SUBK

Index Commentary The DJIA confirmed Friday’s hammer like pattern…formed a morning star like pattern that rose to Thursday’s R3 level…rose a record 936 points. The SPX confirmed Friday’s hammer like pattern…formed a morning star pattern…rose to Thursday’s R3 level…rose a record 104 points.

The Nasdaq broke through Fridays’ R3 level and moved above Thursday’s high and above Wednesday R1 level…rose 194 points, 11.81%...formed a shaven top large white candle. The RUT confirmed Friday’s piercing line pattern…rose above Friday’s R3 with a shaven top large white candle…moved near Wednesday’s R1 level.

Stock Commentary DECK rose above Friday’s bullish engulfing pattern on above average volume WWW fell to S1 of Friday’s bullish engulfing pattern on above average volume. AAPL rose 13.95 above Friday’s bullish engulfing pattern on 55 million shares BIDU confirms Friday’s piercing line pattern with 24% rise on 50% above average volume ORCL and WYNN confirm piercing line patterns SHLD falls to S1 of Friday’s piecing line pattern CTSH rose above Friday’s bullish engulfing pattern…potential breakout HANS confirmed Friday’s piercing line pattern JPM rose above Friday’s bullish engulfing pattern…rising in after hours trading C confirmed Friday’s piercing line pattern…rising in after hours trading XLF confirmed Friday’s piercing line pattern…rising in after hours trading Monday’s Action Moving Up: BIDU, FSLR, GS, MA, MON, POT, ANR, ESRX, PNRA, SOHU, CF, V, NIHD, CLF, BUCY, AMZN, INFY, NUE, MS, MOS, AGU, X, PCLN, CNX, MEE, BTU, STRA, KRE, NDAQ, FWLT, SCHN, IPI, SINA, GRMN, DRYS, FMCN, DECK, KMT, LDK, ONXX, COH, MER, BRCM, EBAY, JASO, EXPE, HANS, KBE, LCC, UAUA Moving Down: ZION Intermediate Term Market Trend: Down Short Term Market Trend: Down

Markets Rally on Columbus Day

12:25 ET...DJIA +553 +6.54%...SPX +60, +6.74%...Nasdaq +118.79, +7.24%...RUT +31, +5.97%, Oil 80.68, +2.98 Following the support bounce that began on Friday, the DJIA, SPX, Nasdaq and RUT are all up at as of mid-day on Monday. Key areas to watch are the R1, R2 and R3 resistance areas of Thursday's large black candles. These are the near term resistance level that price must break through in order to go higher. Remember, when resistance is broken price is likely to rise to the next resistance level and will continue to do so until sellers are stronger than buyers at some resistance level. So far on Monday buyers are taking the markets higher. All nine sectors are moving higher with gains from 2% to 9% on the day. XLV +9%, XLI +8% and XLU +8% are the strongest sectors as of mid-day. The DJIA has risen to Thursday's R1 area and is still below R2 and R3. The SPX has also risen to Thursday's R1 and is below its R2 and R3. As of mid-day the SPX is forming a morning star candle pattern. The Nasdaq gapped through Thursday's R1 and has risen to R2 and is nearing R3. Also forming a morning star like candle pattern. The RUT rose to Thursday's R1 on a strong rise on Friday is at its R2 and nearing its R3. As of this time today's candle is confirming Friday's piercing line pattern. Monday's Early Action Moving Up: BIDU, FSLR, GS, MA, MON, POT, AAPL, ANR, MS, CNX, MOS, ESRX, STRA, PNRA, NDAQ, KRE, HANS, UAUA, LCC, PCLN, MEE, AGU, FWLT, NUE, SCHN, X, SINA, IPI, GRMN, SOHU, CF, CLF, BUCY, INFY, DRYS, V, NIHD, FMCN, AMZN, KMT, COH, LDK, MER, ONXX, JASO, DECK, LAMR Moving Down: ZION

Historic Week Ends...Beginning of the End?

DJIA - 128.00, -1.49% SP500 - 10.70, -1.18% NASDAQ Comp. + 4.39, +0.27% Russell 2000 + 23.28, +4.66% Exchange NYSE NASD Advancing 1,202 1,457 Declining 2,338 1,583 Oil $77.70 -$8.89 Gold $859.00 -$27.50 $SOX 246.11 -2.32 Strongest Sectors: XLF +10.30%...XLY +2.12%...XLP +0.85% Weakest Sectors: XLV -4.40%...XLE -4.09%...XLU -4.06% Sector Watch Up Trending: Sideways: Down Trending: XLP, XLF, XLY, XLV, XLI, XLE, XLU, XLB, XLK This was a historic week on Wall Street in many ways. Most investors are probably glad to see it end. Those who traded the down trend finally have a chance to count their gains and those that didn’t, get a breather from record volatility. The DJIA trading range for the week was 2,440 points. It is an unprecedented weekly trading range. This unprecedented weekly trading range was capped off with Fridays trading of 1,018 points. Just three weeks ago the Dow put in an amazing trading range of 1,023 for the entire week. These wide trading ranges are of course volatility. An explosion in the VIX (the volatility index for the SPX) from 45 on Monday to a high of 76 on Friday is also unprecedented. The question that will be on many peoples mind; does this finally mark the beginning of the end of down trend? Why would anyone consider such a seemingly absurd idea? There are several factors that experienced technicians are aware of: Since WWII the three worst bear markets came to an end at similar percentage drops…2000 to 2002 -38.7%, 1987 -41.1%, 1973 -46.5%. The 2008 bear market hit a low on Friday – 44.3%. The VIX hit an all-time high on Friday and historically when the VIX hits extreme highs the market finds a bottom and rebounds. The DJIA made a extreme move beyond the 2-standard deviation Bollinger Band on Friday, also historically a point where the markets finds buying support. Market bottoms are often made when it appears the market is finally going to come apart and there is no bottom and then out of nowhere significant buying comes in and creates a reversal. Such was the trading on Friday. Also in panic selling mode not everyone sells…only those driven by extreme fear…once fearful sellers have sold they can no longer drive the market down. Why? Because they have sold and are now in cash. Could that have happened on Friday? Markets have a tendency to fall until prices get so cheap that value type investors just can’t resist and they step in and start buying even if it is not quite the bottom. Could that have occurred on Friday? Keep in mind that even if Friday was the bottom it is very common for markets to pull back and test the lows before making sustained moves higher. Be mindful that a market bottom can only be recognized with historical hindsight, however Friday’s trading action has many of the characteristics of past bottoms. Q3 Earnings releases start in earnest this week…be mindful of this in any trading you consider. The Financial Sector, XLF, was the strongest sector on Friday…stocks to watch on Monday JPM, BAC, WFC, C, USB, BK, CME, MER, ICE, ZION Index Commentary The DJIA formed a hammer like pattern…rising 560 points from its low. The SPX also formed a hammer like pattern…rising 59 points from its low. The Nasdaq closed up just over 4 points…following 7 consecutive down days…rose 107 points from its low and finished with a large white candle with upper and lower shadows indicating the large volatility on Friday. The RUT formed a piercing line pattern…finished up 4.66% on Friday…following 7 consecutive down days…rose 54 points from its low on Friday. Stock Commentary DECK forms huge bullish engulfing pattern on over 200% above average volume…on news of strong Q3 outlook. WWW formed huge bullish engulfing pattern on 70% above average volume. AAPL had the largest impact on the Nasdaq rise on Friday…formed a bullish engulfing pattern. ORCL, BIDU, WYNN, SHLD formed piercing line patterns CTSH formed a bullish engulfing pattern HANS formed a piercing line pattern JPM formed a bullish engulfing pattern C formed a piercing line pattern XLF formed a piercing line pattern Friday’s Action Moving Up: DECK, BIDU, ZION, MER, V, RF, HANS, ESRX, KRE, CF, CLF, COH, NDAQ, KBE, GRMN, NUE, LCC, UAUA, EBAY Moving Down: GS, AEM, MA, GDX, ANR, STRA, LAMR, PNRA, MS, LDK, DRYS, SCHN, AGU, SINA, X, POT, CNX, INFY, MEE, BTU, BUCY, NIHD Intermediate Term Market Trend: Down Short Term Market Trend: Down

Markets Fall to New Lows

DJIA - 678.91, -7.33% SP500 - 75.02, -7.62% NASDAQ Comp. - 95.21, -5.47% Russell 2000 - 47.37, -8.67% Exchange NYSE NASD Advancing 300 471 Declining 3,217 2,513 Oil $86.59 -$2.36 Gold $886.50 -$20.00 $SOX 248.43 -7.74 Strongest Sectors: XLK -3.32%...XLI -5.70%...XLP -6.02% Weakest Sectors: XLE -14.40%...XLF -10.41%...XLV -7.68% Sector Watch Up Trending: Sideways: Down Trending: XLP, XLF, XLY, XLV, XLI, XLE, XLU, XLB, XLK The DJIA was up Thursday morning before pulling back into negative territory and trading sideways until about 3 pm. Once again selling came in during the last hour that drove the DJIA down another 400 points. The trend continues to be down. Down ward momentum increased again on Thursday and the DJIA closed down for the seventh consecutive day. The month of October has already seen a record trading range of 2,303 points and this is only October 9. Gold fell as did gold stocks. Oil fell to a new multi-month low and Energy, XLE, was the weakest sector falling more than 14%. All nine sectors moved lower on Thursday and Financials, XLF, fell over 10%. All nine sectors are now in an intermediate term down trend. Index Commentary The DJIA, SPX, Nasdaq and RUT all formed large black candles with a lower high and a lower low reaching a new 52-week closing low. The DJIA, SPX and Nasdaq all reached new lows for the past five years. The RUT broke through a 5 year support and hit a new 5-year low. The DJIA, SPX and RUT spinning tops failed to confirm on Thursday and the Nasdaq’s inverted hammer also failed to confirm. Thursday’s Action Moving Up: MOS Moving Down: STRA, GS, MA, FSLR, X, BIDU, POT, AMZN, ANR, PCLN, MS, ESRX, KRE, ZION, MER, CLF, HANS, KBE, CNX, MEE, NUE, V, SOHU, KMT, ONXX, BTU, MON, AEM, SCHN, GDX, NDAQ, DRYS, NIHD, LAMR, CF, DECK, COH, EBAY, FMCN, LDK, RF, PNRA, EXPE Intermediate Term Market Trend: Down Short Term Market Trend: Down

Market Falls in Final 30 Minutes of Trading

DJIA - 189.01, -2.00% SP500 - 11.29, -1.13% NASDAQ Comp. - 14.55, -0.83% Russell 2000 - 12.38, -2.21% Exchange NYSE NASD Advancing 827 841 Declining 2,701 2,163 Oil $88.95 -$1.11 Gold $906.50 +$24.50 $SOX 256.17 -1.79 Strongest Sectors: XLB +3.23%...XLE +1.89%...XLK -0.90% Weakest Sectors: XLF -4.02%...XLP -2.73%...XLY -1.95% Sector Watch Up Trending: Sideways: XLF, XLP Down Trending: XLY, XLV, XLI, XLE, XLU, XLB, XLK The DJIA managed to get into positive territory four different times on Wednesday, only to see a major sell-off over 300 points during the last half hour of trading. The trend continues to be down. For traders looking for or expecting a bottom to occur, downward momentum was much slower today than the prior four trading days. Remember for momentum to change it must first slow down in the direction it has been moving. Also advancing issues increased and declining issues decreased. There were two sectors today with a positive return. Gold rose again and gold stocks and gold ETF GDX participated in the rally on Wednesday. Oil fell to a new low since its July high. Index Commentary The DJIA, SPX, Nasdaq and RUT all formed lower highs and lower lows reaching a new 52-week closing low for each index. The DJIA, SPX and Nasdaq all reached new lows for the past five years. Only the RUT is above its 5-year low. The DJIA, SPX and RUT formed spinning tops. The Nasdaq formed an inverted hammer. Wednesday’s Action Moving Up: POT, MON, PCLN, AEM, CF, MA, GDX, ANR, CNX, X, MOS, SCHN, NUE, IPI, MEE, AMZN, LDK, CLF, LAMR, V, ONXX, Moving Down: DECK, SOHU, BUCY, GRMN, GS, PNRA, ZION, NIHD, BIDU, INFY, DRYS, MS, LCC, HANS, KBE, RF, KRE Intermediate Term Market Trend: Down Short Term Market Trend: Down

Markets Make New Lows

DJIA - 508.39, -5.11% SP500 - 60.66, -5.74% NASDAQ Comp. - 108.08, -5.80% Russell 2000 - 36.95, -6.20% Exchange NYSE NASD Advancing 458 554 Declining 3,067 2,418 Oil $90.06 +$2.25 Gold $882.00 +$15.80 $SOX 257.96 -16.81 Strongest Sectors: XLV -2.42%...XLP -3.18%...XLI -3.32% Weakest Sectors: XLF -10.56%...XLY -6.42%...XLE -5.48% Sector Watch Up Trending: Sideways: XLF, XLP Down Trending: XLY, XLV, XLI, XLE, XLU, XLB, XLK Health Care XLV and Consumer Discretionary XLY joined the list of down trending sectors. Financial XLF is in its support area and may be the next to change from sideways to down. The trend continues to be down. Keep in mind that when support is broken it is probable for the market to fall to the next support level. Stay with the trend until technical evidence shows a trend reversal. Gold and oil moved higher. Energy stocks moved lower while some individual gold stocks move higher: AEM, GG, GOLD…the ETF GDX moved lower. Index Commentary The DJIA, SPX, Nasdaq and RUT all formed large black candles with that fell below Monday’s lows. Each index closed at or near its low with essentially no lower shadow as there was yesterday. Tuesday’s Action Moving Up: AEM, SINA, Moving Down: FSLR, GS, MA, X, BIDU, ESRX, ZION, PNRA, DECK AMZN, MER, DRYS, LDK, CLF, KBE, KRE, BTU, SCHN, MOS, CNX, ANR, NUE, MEE, GRMN, FWLT, AGU, MON, IPI, PCLN, NDAQ, UAUA, HANS, RF, LCC, V, BUCY, NIHD, CF, JASO, FMCN, COH, EBAY, BRCM, LAMR, INFY, ONXX, KMT, EXPE Intermediate Term Market Trend: Down Short Term Market Trend: Down

Dow Moves Below 10,000

DJIA - 369.88, -3.58% SP500 - 42.34, -3.85% NASDAQ Comp. - 84.43, -4.34% Russell 2000 - 23.49, -3.79% Exchange NYSE NASD Advancing 283 472 Declining 3,261 2,582 Oil $87.81 -$6.07 Gold $866.20 +$33.00 $SOX 274.77 -9.97 Strongest Sectors: XLI -2.62%...XLY -2.81%...XLP -2.90% Weakest Sectors: XLK -5.53%...XLE -5.38%...XLF -5.22% Sector Watch Up Trending: Sideways: XLF, XLV, XLP, XLY Down Trending: XLI, XLE, XLU, XLB, XLK The Technology, Energy and Financial sectors led all sectors lower and the DJIA below 10,000 for the first time since 2004. The DJIA had its largest intra-day point drop in history today. Advancers led decliners by more than 9 to 1 on the NYSE. The trend continues to be down. Keep in mind that when support is broken it is probable for the market to fall to the next support level. Stay with the trend until technical evidence shows a trend reversal. The market did find some buyers late in the day and that caused lower shadows on Monday’s black candles. With the large move down over the past three days, don't be surprised if sellers take a rest on Tuesday. Watch Monday's high as a key short-term resistance area. If the market can't move through there before a rally ends expect a move back to support. Gold moved up $33.00 while oil moved to under $90 for the first time since early February. HANS has again dropped below its breakout level and near its recent support level. KRE bounced off its 200 DMA and was relatively stronger than the broad market and financial sector. NTRI again had a failed support bounce on Monday. Index Commentary The DJIA, SPX, Nasdaq and RUT all formed large black candles with long lower shadows indicating that buyers starting buying late Monday. Watch if Monday’s low becomes an area of support that holds. Monday’s Action Moving Up: MA, BIDU, PNRA Moving Down: POT, MON, GS, X, MOS, STRA, ESRX, ZION, DRYS, FSLR, LDK, NIHD, SOHU, MER, CF, HANS, ANR, AEM, FWLT, SCHN, IPI, AGU, GDX, BUCY, ONXX, CLF, AMZN, INFY, KMT, V, FMCN, COH, EBAY, BTU, NUE, KBE, NDAQ, UAUA, RF, LAMR Intermediate Term Market Trend: Down Short Term Market Trend: Down

Markets Break Support After Bill Passes House...

DJIA - 157.47, -1.50% SP500 - 15.05, -1.35% NASDAQ Comp. - 29,33, -1.48% Russell 2000 - 18.27, -2.87% Exchange NYSE NASD Advancing 1,201 818 Declining 2,250 2,073 Oil $93.88 -$0.09 Gold $833.20 -$11.10 $SOX 284.74 -3.81 Strongest Sectors: XLP -0.80%...XLB -0.98%...XLE -1.19% Weakest Sectors: XLF -4.38%...XLY -3.50%...XLV -2.15% Sector Watch Up Trending: Sideways: XLF, XLV, XLP, XLY Down Trending: XLI, XLE, XLU, XLB, XLK Friday is the classic example of why we teach the principle to trade the markets not your thoughts. It was a reasonable thought the way the markets had been trading over the past two weeks that the market would rally once the financial resolution bill passed successfully. Only that's not the way it worked. The market was up significantly before the bill was passed by the House, in anticipation of passage. However once it was clear the bill had passed the markets sold offi in a big way and even broke the support of the recent horizontal low. The Russell continued its break of horizontal support and like the rest of the indices is now in an intermediate term down trend. The breadth of the drop is not as quite as weak as the worst days over the past two weeks...even our small watchlist had several stocks move up on Friday. HANS rallied 11% on Friday and is above its recent breakout level. Chart target is 37.50. NTRI had a modest bull flag support bounce and was up for the day on Friday. Need to break through DMA to have a convincing move up. KRE reversed its bull flag support bounce on Friday. Index Commentary The DJIA, SPX, Nasdaq and RUT broke below horizontal support. Watch the R1 resistance of Thursday's large black candle if any rally is to be more than a counter trend move in the existing down trend. Friday’s Action Moving Up: HANS, STRA, RF, POT, ANR, FWLT, MON,MOS, MS, SOHU Moving Down: FSLR, BIDU, DECK, ESRX, KRE, KBE, GS, PCLN, GRMN, UAUA, DRYS, CF, FMCN, LDK, KMT, INFY, COH, V, LAMR, MER, ONXX Intermediate Term Market Trend: Down Short Term Market Trend: Down

Markets Move Lower Before House Vote

Dave was teaching in a workshop on Thursday and is traveling tonight...will post on Friday.

Markets Pause...Close Moderately Lower

DJIA - 19.59, -0.18% SP500 - 3.68, -0.32% NASDAQ Comp. - 12.93, -0.62% Russell 2000 - 7.99, -1.18% Exchange NYSE NASD Advancing 1,706 1,063 Declining 1,742 1,819 Oil $98.53 -$2.11 Gold $887.30 +$6.50 $SOX 303.23 -3.66 Strongest Sectors: XLF +3.92%...XLP +0.72...XLV +0.67% Weakest Sectors: XLI -2.37%...XLB -1.65%...XLE -1.64% Sector Watch Up Trending: Sideways: XLF, XLV, XLP, XLY Down Trending: XLI, XLE, XLU, XLB, XLK The Financial Sector, XLF, was the strongest sector for the second day in a row. The SEC extended the ban on the short sale of more than 800 financial stocks. The ban was set to end on October 2, is extended until three business days after enactment of the $700 billion financial resuce bill, but not later than October 17. The Senate approved the $700 billion financial rescue plan Wednesday evening. The bill now goes to the House which is expected to vote on the bill on Friday.

Gold and Oil traded places again from Tuesday to Wednesday. Gold was up on was up on Wednesday and Oil was down. The Airline group responded with gains from 5% to 16%. Check the charts of LCC, DAL, AMR, UAUA and CAL. HANS formed a higher high and higher low and closed above its 30 horizontal breakout area. KRE closed above the high of the low day and formed a higher high and higher low in its bull flag pattern. This would be an entry signal for some traders. NTRI formed an inside day and spinning top in its bull flag pattern. Watch for a support bounce in this flag patten.

Index Commentary The DJIA failed to confirm Tuesday’s bullish harami but did form a hammer candle that stayed above Tuesday’s S1 support level…watch for potential confirmation of the bullish harami and hammer on Thursday. The SPX also failed to confirm Tuesday’s bullish harami and did form a hammer that closed above Tuesday’s S1 support…watch for potential candle confirmation on Thursday. The Nasdaq formed a hammer on Wednesday that failed to confirm Tuesday’s bullish harami…watch for potential confirmation of the bullish harami and hammer on Thursday. The SOX failed to confirm Tuesday's bullish harami. The RUT also failed to confirm Tuesday's bullish harami and formed an inside day.

Wednesday’s Action Moving Up: FSLR, GS, ZION, LDK, KBE, NDAQ, DRE, PNRA, STRA, MS, MER, JASO, LCC, HANS, RF, UAUA, AEM, Moving Down: X, MA, CLF, CNX, POT, BTU, ANR, PCLN, BIDU, BUCY, FWLT, AMZN, CF, NIHD, EBAY, DECK, COH, MEE, SCHN, AGU, MON, SINA, GRMN, FMCN, INFY, LAMR, NUE Intermediate Term Market Trend: Down Short Term Market Trend: Down