Rumors...Questions...Not a Lot of Answers...

DJIA                            10,520.32 -347.80 -3.20%
SP500                           1,128.15   -37.72 -3.24%
COMPQ                        2,319.64   -82.65 -3.44%
Russell 2000                    672.23   -26.35 -3.77%

Exchange                   NYSE              NASD
Advancing                     173                  355
Declining                    3,016               2,444

Oil        $77.11          -2.86
Gold    $1,196.90      +22.30
SOX      352.54          -12.00
VIX          32.80          +7.89

Index  Direction    Confirmation
VIX      Up             Yes
SOX    Down         Yes – COMPQ

Key Resistance Levels
1,145 = 1,133 BO chart target – Dec 31 Low
1,155 = 1,119 BO chart target – Dec 23
1,178 = Fib extension
Key Support Levels
1,125 - 1,133 = 1,075 BO chart target - Sep 08 Low
1,119 = December High
1,105 - 1,113 = November High
1,101 = October High
1,087 = Nov 10 Channel low
1,082 = Nov 9 S1 level
1,075 = 875 Breakout Chart Target

Thursday the DJIA had its largest intraday point drop ever. The broad indexes and most stocks had an unprecedented 12 minute drop and pop in which the DJIA moved down over 500 points and then rallied over 500 points. Rumors circulated this afternoon that erroneous PG trades set it off or that a trader at C inadvertently placed an ES e-mini order for 16 billion instead of 16 million sent the market lower and that selling pressure triggered computer sell programs. However, no one seems to know for sure.

Look at these Charts

(click image to enlarge)

Today's V pattern reminded me of what I stated back in November 2005.  Some of you remember an interview that I did in November 2005.  Here is the last question and my answer from that interview:

At this point in your trading career, what is the most important rule you follow to help you be successful?
Every investor should have a trading plan, a well-defined set of rules and use a trading journal. An investor should always identify trend, support and resistance, and momentum. An investor should buy near support and sell near resistance. An investor should buy when a buy signal occurs, and sell when a sell signal occurs - not after the fact. An investor should think in terms of probabilities and always maintain mental flexibility. An investor should have a target and a stop on every trade - no exceptions. Investors should manage their money, realizing that the crash of 1987, or a 9/11 event, is not a matter of if it will happen, but when. An investor is prepared for the worst every single day and is able to survive the worst at all times. Investors should define successful trades as those in which they followed their rules, regardless of whether the trades were profitable or not. Investors should be focused on following their rules all the time.

I've adapted an old Buffet quote to trading. I say, "Rule # 1: Follow your rules. Rule # 2: Don't forget rule #1." To put it another way, an investor should always exercise discipline; discipline in following a well-defined approach. Focus and discipline are the keys to consistent trading success.

Thursday was one of those be prepared for the worst, kind of days.  It's on days like this that being prepared really pays off.  While stocks moved broadly lower bonds TLT and gold GLD moved higher.

Stocks moving higher today on positive earnings MED amd MGA

Look at these Charts

(click image to enlarge)

Look at bearish opportunities in inverse ETF's like SH and SDS and stocks below their 30 DMA and stocks near their 30 DMA if they break through to the downside. Check our watch list below.

Guidance: 
The SPX fell through 9 support levels before hitting bottom at 1,065 and then rallied 60 points to close at 1,128.  The majority of the move lower and rally occurred in about 12 minutes.

More stocks broke their 30 DMA on Thursday while a few stocks managed to stay above support and in their current up trend. There are still more stocks below their 30 DMA than above in our watch list.

Continue to trade with the trend.  Your mentally flexibility helped you take advantage of the break of support.

 The VIX rose +7.89 and did confirm the lower close on Thursday,.

The short term trend is down.
The four-month trend is up.
The twelve-month trend is up.

Continue to focus on and trade setups on the charts of the stocks you watch, trade with the trend and follow your rules.

Adjust your stops according to your rules for up and down trending trades.

AAPL -9.73
QCOM -0.96
GOOG -11.09
BIDU -21.51
NDX 100 stocks stronger than the NDX include: SYMC, FISV, DTV, LOGI, ADBE, HOLX, AMZN, EBAY GENZ, LLTC, HANS, VRSN, VRTX, AKAM and GRMN.
Stocks to Watch on Friday
Holding Above 30 DMA
NFLX, WHR, SNDK, ZION, MCD, BYI, ICE, FAZ, NTRI, OSTK, AIV, EXBD, PNC,
Moving Above 30 DMA = 0

Moving Below 30 DMA = 14
URE, DHR, CRM, GME, SYNA, HLF, SPG, GR, HANS, LXK, STI, WFC, WFMI, WMT
Staying Below 30 DMA
ACN, BA, CAT, LVS, MYGN, SWK, AMX, BKC, DE, DECK, DOW, FAS, FLS, JEC, PCLN, PCP, TSL, UAUA, UNP, USD, USO, UYG, ATW, AMD, BAC, CREE, GES, MA, V, CAM, CHL, SWN, UNG, ATI, BUCY, WLT, CLF, MHS, WCG, ESI, GMCR, GS, FCX, X, PWRD, AGU, IPI, POT, MOS

Intermediate Term Market Trend: Up
Short Term Market Trend: Down