09.19.2011 -- Just a pullback

This is a tough market to trade. Hopefully not to many of you got caught short down around DOW -180 thinking we would tank into the close.

The daily bollinger bands once again showed up to provide markers.

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Key Levels;

Upside -- 1225, 1258-1283 is a big cluster of resistance

Downside -- 1185, 1165, 1120, 1102

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We'll go straight to the bollingers and the chart.

SPX Daily;

We traded the daily bollingers again. You can see there that we fell down through the top but stopped just above the mid-bollinger line and found some support and then traded back up and managed to close just above the bollingers.

Todays candle and where we closed really makes me think todays sell off was just a pullback in the middle of this larger move that is still targeting 1260-1280 by EOQ. 9 Trading days left until end of quarter.

What I think may happen is that we do see this market top out this bear market rally in that 1260-1280 range, which will test some moving averages from underneath. The test will fail.

That will leave us with a market that just completed a bear market rally, failed at big moving average resistance AND just completed end of quarter and heading into one of the typically worst months of the year for the stock market.

Everything is lining up. MACD is close to positive, the Stochs are going to be topping out soon, 9 days until end of quarter, the bear flag is completing its pattern.

This next drop will be bad.. it could be horrific. It depends on where we are in this cycle. My targets are either 1040 or 820. I think we'll reach one of those targets end of November or early December and then have a bit of a relief xmas counter trend rally.

Violent times are coming.

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A couple more points of some things that for me cement that we have more buying to do and we will hit those targets in the upper 1200s.

1) Look at the action today in LULU, AAPL, CMG, PCLN, and AMZN. The momo stocks are alive and kicking. In fact, many of these are at or near all time highs. These will fall apart and the falling apart will signal that what I described above is about to happen. For now though, these stocks are charging ahead.

2)For such a whipsaw of a selloff, volume was low today. When the cluster bombs start going off, volume on the selloffs is going to be very high.

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Last mention of the day. NEWS WILL TRUMP ALL THIS. If a bank in Italy or France blows up overnight or more likely the CDS spreads launch on something overnight that indicate a blow up is about to occur. If Germany makes a drastic decision to back out of bailouts. If the euro begins to crumble.

Any of these things can happen overnight and trump everything else. It can accelerate plans and instantly change the picture.

It's the primary reason I am only lightly playing this rally with a very quick trigger finger.

I got popped out today with a small profit and will stay flat until my goal of heavily shorting the market over 1260.

GL

CJ