It’s Friday after the close, and it doesn’t feel like a normal trading day just passed.  It was more like a holiday, where the big shots get the day off and we little fry still have to push papers around and look busy.  The Dow Jones and S&P 500 were barely green, the Nasdaq barely red.  Overall, a big fat nothing for most people.

I will refrain from relating any of the rapidly increasing number of jokes about the Euro bailout, except to say that, no, Mr. Sarkozy will not come and wash your car if you agree to invest in his fund, and that the waiter at your local Greek restaurant will not even smile if you say you expect half off your check.  Probably the funniest comment was a real one made by our man in Roma, “Macho Man” Silvio Berlusconi, when he claimed that nobody was stronger financially in Europe than Italy except Germany.   One has to wonder if his next campaign will revolve around making the trains run on time.  Charlie Chaplin would have a field day making a movie about this guy.

Anyway, there are two paths to choose in this market.  Either you are in the camp that says “Overbought be damned, full speed ahead and never mind the torpedoes Mr. Gridley,” or you think that the normal rules may reassert themselves at some point now that Europe is in the rear-view mirror for a few months or more.  Everybody has an opinion, and opinions….  Well, anyway, people are going to bet on this with real money, so it is a serious issue.

As I wrote last night, the trend is up.  Today also was mostly up.  It was easy to expect some profit-taking, at least that’s what the talking heads on CNBC mouthed with their patented and studied look of amazement and wink when there wasn’t much selling that was supposed to say, “Well, you know what THAT means, folks!”  But the Euro markets were up slightly, too, and they had a lot more reason to take profits than we did.  That the market stumbled into the close without much of a change didn’t prove that thesis right.  In fact, perhaps just the opposite.

Take a look at the daily chart of the $SPX.  What do you see?  I see a nice little Doji sitting there for today’s trading.  “Doji” by itself doesn’t really translate into English, but the meaning often given to it is “A sudden danger.”  My Candlesticks book calls it “The Magic Doji.”  It is a Bearish reversal indicator after an uptrend.  Now you can add that to all the other indicators (including the startling absence of late buying on Friday) that have been saying for the last two weeks that the markets are overbought.  It may mean nothing, the markets have just kept relentlessly rising – but a lot of people take this candlestick stuff seriously.  I do, too.  But in an endless Bull market, that may not mean anything, either.

To think that this market continues higher requires faith.  You must have faith that there are endless supplies of money sitting on the sidelines or still short, just waiting to buy into a month-long rally.  You also need to have faith that people who made easy money on Thursday or the weeks before that won’t take profits at the slightest sign of trouble, or for no reason at all.  That’s the uncanny thing about October – there were none of those down days explained away by the talking heads as profit-taking days.  None!  Weird.

I don’t listen to the people on Stocktwits or elsewhere who say the market has to crash because Europe or the US has too much debt, or that there has to be a crash because someone’s Waves or The Cloud predict one, or just simply that this is all manipulation setting all of us poor little Bulls up to be slaughtered.  But the market has to pause for breath at some point, because, well, it always has before.  With the end of the month pretty much behind us now – Monday is the last day, and window dressing is usually done by then – we may see a turn back to normalcy after this weird October.  I bought some $TZA that I’m holding and probably will wind up holding for quite a while, until a real pullback occurs.  And rest assured, there will be one – some day.

So you can live on faith and wait for the momo market to burst eventually, like the ill-fated $NFLX.  Maybe you’ll get out in time….  But then you won’t be living in Doji City.

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