Exposing Ideas to the Envelope of Serendipity

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Tuesday, November 1, 2011

Enter November

Following an epic October rally, the markets are transitioning to a new month with a much-needed pull-back out of short-term overbought conditions. Note in the chart below that the /ES is nearing some good support, where it will be important to watch for signs of buyers stepping back in. In these times of often accelerated and exaggerated moves,  we may see this "mini-correction" play out very quickly, and as such, this is an opportune time to be compiling a shopping list to have ready when the selling is exhausted. The present pull-back will also undoubtedly serve the purpose of convincing many bears that the recent run-up was nothing more than a bear market rally and much lower prices are on the way. While anything is possible and there is unfortunately no crystal ball in which to gaze for infallible market prophecies to be revealed, be careful not to underestimate the bullishness of the past month, and the very significant technical signals that registered during the emphatic ascent. While I did take a few short-term short plays over the past couple of sessions, I am very lightly positioned overall and will be watching and waiting for highly probable reentry on the long side. Long-term charts have turned increasingly bullish, favorable seasonality has arrived, and I suspect that we will soon be presented with the next important buying opportunity.

Trade well.

-- Brinkley
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