Exposing Ideas to the Envelope of Serendipity

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Thursday, October 7, 2010

Headwinds to Heed

While bullish on the overall direction of the market, I've warned several times that October is likely to serve up a hefty dose of volatility. On Wednesday, we may have seen a preview of some turbulence ahead. Not only is there some major resistance not far above here, the market has traveled far in a short time. There are gaps galore left behind in its haste, and the violent thrashing delivered to many tech stocks yesterday all serve as reasons to be cautious in the near-term. To be sure, there are also many positives to behold -- strong internals, bullish patterns, and clear signs of accumulation on pull-backs, to reiterate just a few. But we may be approaching or at a level where we continue to see signs of rotation and targeted corrections, and traders need to be extremely careful to protect profits and employ strict risk management methods at this juncture. Keep in mind we are also entering earnings season which carries with it its own flavor of volatility. Let's take a look at the $SPX and $NDX to see where we are and some key levels to be cognizant of.

Trade well.

-- Brinkley
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