The Drift is Over

The One-Way Little Guys are done drifting the Holiday Market and the current upswing looks like it will attempt a second gap down roll-over. It looks like concerns about slowing growth in China and the rest of the world are the catalyst. However, if you have been following the current upswing, you know that it was time for a rollover last Wednesday with the gap down - but the One-Ways were too excited about being in charge of the market with all the Big Money on vacation and they did what they usually do, drift the market up on light volume. Today they may not be so lucky. The time is right for consolidation anyway, and with Big Money back from vacation the One-Ways won't be able to skew the price action with short-covering and day-trading.

The big X-factor in today's trading is the ISM Index, which will report 30m after the open this morning. If the numbers aren't catastrophic, the real Bulls may take back over the market. Most analysts are looking for a reading of 38.0, which is very low, and very recessionary. So even if we get a number around 40.0 - 41.0, it may not be enough to push the Dow above 8,830 - 8,850, which would be my stopping out area for puts.

Here is a chart of the Dow:
(click on image to enlarge)

You can see that a move above 8,850 would probably open the way for a move to 9,000 and then a surge into the 9,200 area. However, barring a great ISM number, and given the swing is probably ready to consolidate, I am looking for the Dow to reach down to 8,500 today, and then perhaps the 8,250 area in a downswing over the next several days. The SPX and the Naz are more at risk because those indexes are Intermediate Term Bearish, whereas the Dow is more Intermediate Term Neutral. The market still has to create a solid bottom from the sliding and crunching bottoming out process that it is fighting through. The SPX and Naz are still at risk for lower lows, which would be somewhat devastating to the Bulls.

For today, I am looking for puts. We'll see what happens with the ISM.....

4:30 pm MT: Market Wrap: Silly me.....I thought the Dow dropping to the 8,250 area would take a couple of days.....then I remembered the now, now, now world we live in and presto - we do it all in one day!

Ssssoooooooo, I was obviously playing puts all day. I had two nice "paper" trades on the DIA and SPY down to 8,500, and then again down to 8,250 just before the close. The Dow finished even lower at the close.

It's the usual for tomorrow. I nice wiggle out of the gate and I'm looking to re-load the puts for a move down to the 7,800 - 8,000 area. We'll see what tomorrow brings.....

Note: I was asked to do the Market Cast today, so if you just can't get enough of me, then you can indulge in my latest ramblings in that format today.