Raise your stops or take your profits. Protect yourselves from the SELL THE NEWS REACTION.

We warned you yesterday, big time!

JUST DO IT! YOU HAVE BEEN WARNED

I will be posting many charts this weekend with raised stops in most stocks, but I am keeping most yield-oriented stocks…

“MORTGAGE FORCLOSURE CRISIS HITS BANKS. A THREAT TO THEIR VERY SURVIVAL.”

Markets will begin a sell-off of interesting proportions. The politicians will propose a remedy that helps the “unwashed masses” of underwater homeowners. Some say there are over 11 million households in this position. That is a awful lot of voters.

It will be fixed, but not until we get a good scare. God Bless America.

The performance of the finacial stocks has lagged the overall market throughout this rally. That fact worried some but most chose to ignore due to the outperformance of everything else.

Today the group is under severe pressure.

Is is Forclosure-Gate? Overall real estate? Free houses for everyone? The fiction of bank’s shareholder’s equity? I don’t know.

I only know that I wouldn’t touch them with a ten-foot pole. And the meaning to the rest of the market should not be discounted.

It goes along with our timing strategy of a sell off after option expiration and before the election. It probably won’t happen right away or begin a plunge, but the warning signs are flashing. Raise those stops or ring the bell!

After six uninterrupted weeks higher, we are “overbought”. But technical terms mean a lot less nowaday’s unless they are adapted to the current market structure. Overbought means “buy to extremes” and we are clearly in the land of overbought extremes.

There have been 8 Bear Traps where a spike to range highs follows what looks like a market rolling over. It has been preceded by continued weakness in the dollar (DXY) which is down 8.5% since Sept. 1. But the SPX’s gains have outpaced the dollar’s losses as the SPX gains have been almost 13%. So the SPX strength is far outpacing the dollars weakness. Hmmm…

October’s long awaited Option Expiration is tomorrow. The hedges have been sufficiently burned. The shorts have been sufficiently toasted and the doubters are now believers–regardless of the facts.

With the election ahead and the holidays after that, many prognosticators will talk about “green shoots” and ignore everything else. After alll, it is the seasonally strongest time of the year as well as a great time to delude oneself.

With all this overwhelming strength, we cannot expect the market to get hammered. How about a test of the breakout at SPX 1130? That is almost 50 SPX points lower and would qualify as a correction. But market breadth for both the NYSE & Nasdaq have broken out. Maybe a correction could bring it back down to earth, but the fact is that internal breadth usually turns down before a correction, and it has not yet done so.

So we must ADAPT our tactics. Instead of selling outright at our CALENDAR target, simply raise your stops in all your handsomely profitable positions. If we get a decent pullback, then the market will lock in our profits. If we keep up the “Gentle Parabolic Insanity”, then we will be along for the ride. But don’t sell your yield stocks as you will need them.

Make sense?

We’ve been YHOO watchers for some time now. Our interest began primarily when we noticed that Soros and his minions took a large ownership position in Alibaba, which is 40% owned by Yahoo. So when the stock recently received some very negative press about their investment in Alibaba and other Asian properties, our ears began to perk up.

Then came what seemed to be a very concerted yet transparent attempt to discredit and dislodge management through the press. The vast PR machine was put into gear and the President of the company was routinely trashed in the press. There were also calls in the press for a hookup between AOL (market cap $2.6B) and YHOO(market cap $19.5B).

Today I noticed the stock outperforming, but I chalked it up to the stock playing catch up. I would not imagine that someone would try to buy YHOO considering the poison-pill caveats they instituted to fight off MSFT. That was literally committing corporate Hara-kiri. My patience had been running thin and I thought the PR campaign was simply to pressure management into selling their Chinese investments before they went public. I was clueless as to a takeover offer.

Tonight the stock is near $17 on the news that AOL, private equity or a large media firm is interested in a takeover and the company hired GS.

Here is a chart of our most recent buy.  My guess is it will go for $22.

There are many technical indicators that have their uses. This chart will examine the classic Bollinger Bands and their characteristics over the long term. This is a decade-long chart of the SPX.

Please read the annotated comments and note the BBands behavior.

This is the kind of chart you will find on my premium service.

ADDENDUM: Not in a straight line!