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Thank you for the feedback regarding my 12631 post last evening. Ragin Cajun and I welcome all comments and questions about the premium service we will launch inside The PPT on November 12.

Turning to the market, the swings over the past two days have been enough to push some of the more emotional traders over the edge. I have found that the best strategy in these kinds of situations is to have a definitive plan, and here is mine. As you know, I adopted a more neutral stance on the market during yesterday’s sell-off, while many others were declaring a major top. I have plenty of long exposure, but took out a small insurance policy in the form of $SDS (ultrashort the S&P 500).

Despite how potent today’s snapback rally seems, the updated and annotated daily chart of the S&P, seen below, illustrates that the prior support trendline has not been recaptured. My plan is to hold on to my hedge until the bulls can negate yesterday’s sell-off, by way of reentering the steep uptrend line since September. If that happens, I will quickly sell out of $SDS, and return to being bullish on both short and intermediate term timeframes.

Should today’s rally fizzle out, I would grow more cautious if the bears could breach the rising 20 day moving average, currently sloping up at 1158. The bears are looking for that prior support trendline to now turn into current resistance.

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As a general rule, strong trends do not immediately reverse. Rather, topping and bottoming is a process. Thus, even if we are indeed topping, I will hold off on adding any other insurance policies besides the $SDS (ultrashort S&P) that I bought earlier. I expect the 1150-1160 zone to act as a sturdy first level of support, and as I write this, eating fresh red grapes and drinking espresso, I see we have fashionably arrived in that zone already.

What you are looking to see is whether an abundance of stocks can hold their respective 20 and 50 day moving averages during this sell-off. The bulls have made a fair amount of progress over the past two months, and those rising moving averages will likely count for something. Today was the first strong showing for the bears in quite some time, but it is far from prima facie evidence of a reversal in trend.

If you are looking to get more aggressive on the short side, then a dead-cat bounce in the next day or two will be the smart entry point, as opposed to trying to pile on now. Similarly, if you are looking to buy the dips, today is merely the first day of correcting that we have seen.

In other words, go grab some red grapes and brew some Illy espresso instead of making hasty moves at this time.

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Let’s try to be stoic and take a look at how much damage is truly being done to the market today, with the selling. Here is an updated and annotated daily chart of the S&P 500.

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As you can see, the steep support line has been breached. However, that does not necessarily mean that the entire rally from September is officially over. Instead, I believe it is a signal to adopt a more neutral stance today. I bought a full position in $SDS (ultrashort the S&P 500), with the idea of immediately selling into more market weakness. I view it as a very short-term insurance policy, as I expect the 1150-1160 range to act as solid support in the coming days.

I also sold out of the rest of my $WYNN, locking in a nice win. The stock had broke below the high consolidation, and that was my cue to hit the exits for now.

All trades are timestamped inside The PPT.

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TOTAL PORTFOLIO:

EQUITIES/ETF’s: 52%

• LONG: 44% ($ATPG $DDS $HMIN $MSTR $RGS $SHLD $WPRT)
• SHORT: 8% (Long $SDS)

CASH: 48%

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I am collecting the money that is owed to me. Just so you know, the vig I charge is high.

I sold out of the rest of my $GS (cost basis from $145) in front of their earnings tomorrow.

I also sold out of $TIE, as it was taking way too long to get going and is weak. I will use the cash to stalk other names acting well, many of which were on my list of setups last evening,

All trades are timestamped inside The PPT.

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TOTAL PORTFOLIO:

EQUITIES/ETF’s: 48%

• LONG: 48% ($ATPG $DDS $HMIN $MSTR $RGS $SHLD $WPRT $WYNN)

CASH: 52%

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The market action today reminds me of how to best grill ribs—low and slow. While there are occasional bursts of flames, in the form of some small-cap China, biotech, or rare earth metals play ripping higher, when taken as a whole the market is rather sluggish today. With some key earnings reports coming up early this week, I would imagine that is what is causing many traders to look for mostly intraday scalps.

Once again, I see many bears are out boldly declaring this the top. And, once again, I am reticent to try to play “Truth or Dare” with Mr. Market, in the face of a potent uptrend that we have seen since September. One interesting thing to note today is that the financials are the top performers, after getting decimated last week. While today could easily be a dead cat bounce from the carnage, the updated $XLF chart, the ETF for the financials, indicates that the key flattening-out 50 day moving average is holding well thus far. If the bulls expect to breakout of the financials’ multi-month trading range, I believe making an important higher low here (within the context of the past few months) is crucial.

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RAGINCAJUN & chessNwine coming soon to The PPT, via 12631.

[youtube:http://www.youtube.com/watch?v=pFoJSmSDtL4 450 300]r

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NOTE: 12631 is coming. More details to follow.

I bought a full position in $DDS, based on the chart I featured last evening, as well as the huge short position and possibility for a squeeze.

I also sold 1/2 of my $GS position in front of their earnings tomorrow morning. As the day progresses, I will consider selling more. I am up nicely on the trade, and see no reason to risk most of my profits into earnings.

I sold out of $CSTR, locking in a big winner for me. I will likely revisit the position in the near future. I do not like the action today, and for now I am happy to sell my shares to the latecomers in this name.

All trades are timestamped inside The PPT.

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TOTAL PORTFOLIO:

EQUITIES/ETF’s: 60%

• LONG: 60% ($ATPG $DDS $GS $HMIN $MSTR $RGS $SHLD $TIE $WPRT $WYNN)

CASH: 40%

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