First of all, I would like to thank David Gaffen from the Wall Street Journal for quoting and featuring our blog in Tuesday’s Blogroll Column. Since April (when I first started writing daily in the blog) the response has been overwhelming. I wanted to bring my readers an educational and worthwhile read on a daily basis and it seems as though I am moving ever closer to my original goals. I appreciate all of the positive feedback and I hope to continue to bring products and services that will help you with your trading/investing. Thanks again!
The market moved lower after a suprising core PPI was reported Tuesday morning. However, the selloff did not last long as buyers stepped in around noon EST and brought the market back to where it started the day. We typically see markets react like this when the first sell-off occurs after an extended rally, so today’s intraday reversal was not unexpected.
I still think with all of the short-term bearish indicators that currently reside in the market we could see a correction over the coming weeks. If the market continues to trade in a tight range throughout the week of options expiration we should be prepared for the possiblity of a post-expiration sell-off. This type of action typically occurs the day after expiration. If the market does happen to sell-off over the short-term watch the 1353-1355 area on the S&P. If the market breaks below this area we could be in for a nice correction over the short to intermediate-term.
The performance for Septemeber and so far, October, have been better than most analysts anticipated. So I am going to repeat what I have been saying over the last few weeks. “Another interesting (and not often mentioned) statistic that I came across was that when the market had a strong September and October during the mid-term elections (4 year cycle) every single time the market experienced a dramatic sell-off during the middle of November. The scary thing was that the sell-off averaged 5% to 10%. This is certainly something that we will be watching as we move closer to the mid-term elections.”
I know I promised not to mention it again, but I am really interested in this historical phenomenon. Also, I apologize to all of my loyal readers for not posting Tuesday’s commentary sooner. A few unexpected things popped up that could not be ignored so I was not able to post during my usual timeframe. Take care and have a wonderful Wednesday.
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RSI Wilder (5) for October 17,2006
- SPY - 70.3 (overbought)
- DIA - 78.3 (overbought)
- IWM - 75.2 (overbought)
- QQQQ - 58.3 (neutral)
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Andrew Crowder, Chief Investment Strategist, Crowder Investment Research, LLC