Option Investor
Market Wrap

Wild Ride II

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The market this week has been like the weather--if you don't like the market's direction one day just wait until the next for a reversal. And what reversals! Yesterday the DOW made a 176-point run from its low to its high, one of its largest one-day gains in 6 months. Today it did a little better than that but in the opposite direction--to the tune of of 180 points from high to low. Curbs were triggered once the DOW lost 160 points. I can't even remember the last time curbs were triggered. The S&P was even more volatile--it rallied 24.78 points (equivalent to nearly 220 DOW points) yesterday and then declined 24 points today. October opex volatility has hit with full force. I hope traders had their helmets on and were strapped to their seats. I was and I still got whiplash.

Talk to 100 different traders and you'll get 100 different opinions as to what this week's action means. It ranges from the bullish "we're hammering out a bottom" to the bearish "yesterday's rally was a one-day wonder, a typical bear market rally". Frankly we simply don't know yet. The next couple of days will be very telling. Over the past few weeks I've expressed some opinions about my bearishness--the market is set up remarkably similar to past bear market rallies and declines and the pattern suggests a hard down period into the end of this month. Some cyclical studies suggest the same thing. If we start selling off hard from here, sell the rallies since we probably have a long way down. But it's too early to tell and we'll look at some charts to help identify action points.


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In the meantime, reviewing today's economic reports, they included jobless claims at 8:30, the Leading Economic Indicators at 10:00 and the Philly Fed report at noon. On the jobless front, initial claims fell by 35K to 355K (consensus was 365K so better than expected). Hurricane related filings were estimated at 40K bringing that total to 478K. The 4-week average jobless claims dropped 20K to 376K but the continuing claims rose 36K to 2.89M.

The Leading Economic Indicators fell -0.7% versus -0.5% that economists were expecting. This measures future U.S. economic activity and its decline in September was the third month in a row, indicating slower growth projection for the rest of the year. It was the biggest decline since March and the hurricanes in the Gulf got the blame for the drop. The coincident index fell -0.1% in September, which was the second decline in a row, while the lagging index rose 0.2%.

The October Philly Fed survey came in at 17.3 vs 10.4, so better than expected. This was up from 2.2 in September so it was a big jump. New orders climbed sharply from September's -0.5 decline to October's +18.6 and employment jumped to 17. Shipments rose from 13.2 to 19.5 and Fed prices received jumped up to 32.6 from 8.6 while prices paid also increased to 67.6, both of which shows strong growth. It's hard to tell if the market reacted to this or not--bonds barely moved on the data but equities got hammered this afternoon. I'm thinking the selling in the equities probably didn't have anything to do with this report--investors wanted out that's all. What they loved yesterday, they hated today.

We're hot and heavy into earning's reports and without hitting every company which reported this morning, here's a list of some of the majors, as reported in MarketWatch:

Pfizer profit tumbles 52%, cuts 2005 guidance
PFE said third-quarter net profit tumbled 52% at $1.59 billion, or 22 cents a share, with revenue down 5% at $12.2 billion due to generic drug sales and lower sales of the selective COX-2 inhibitors. Worldwide Lipitor revenue grew 6% at $2.9 billion. Pfizer's adjusted earnings of 51 cents were ahead of analyst forecasts of 48 cents a share, while revenue came in below the $12.5 billion forecast, according to Thomson First Call. Pfizer also cut adjusted EPS to $1.92 to $1.94 range and diluted EPS to a $1.02 to $1.04 range; brokers were looking for $1.98 a share in earnings for the year. It sees more than $600 million in cost savings for the year, and said cost savings will accelerate over the following three years, with about $2 billion in savings targeted for 2006, about $3.5 billion in 2007, and about $4 billion upon completion in 2008. The cost savings will cost $4 billion to $5 billion.

Provident Bankshares net income rises 11% to $20 million
PBKS said third-quarter net income rose 11% to $20 million, or 60 cents a share, up from $18.5 million, or 54 cents a share, for the year ago period. Analysts expected the Baltimore, Md.-based bank to earn 59 cents a share.

Bank of New York net rises 10%
BK said Wednesday its net income rose 10% in the third quarter amid growth in securities revenue and net interest income. The company earned $389 million, or 51 cents a share compared to $354 million, or 46 cents a share a year ago. According to analysts polled by Thomson First Call, the average estimate for the quarterly earnings was 50 cents a share.

Sallie Mae net rises 21%
SLM to report core earnings of 63 cents a share, just a penny higher than the second quarter's profit. Sallie Mae reports earnings on both a "core cash" basis -- the one Wall Street analysts use -- and in terms of net income.

Cypress Semi adjusted 3Q earns $3.8M on revs of $227.1M
CY reported a third-quarter loss of $5.9 million, or 4 cents a share, down from a year-ago profit of $4.3 million, or 2 cents a share. On an adjusted basis, excluding items, the San Jose, Calif., chip maker earned $3.8 million, or 3 cents a share, in the latest quarter. Revenue rose 3.4% in the latest three months to $227.1 million from $219.6 million in the same period a year earlier. The average estimate of analysts polled by Thomson First Call was for a profit of 5 cents a share in the September period on revenue of $232.6 million.

Level 3 posts wider 3Q loss from previous quarter
LVLT reported a third-quarter net loss of $204 million, or 29 cents a share, compared to a net loss of $188 million or 27 cents a share in the second quarter. Consolidated revenue was $799 million, down from $910 million in the second quarter. A survey of analysts by Thomson First Call forecast a loss of 31 cents a share. The stock rose 11 cents to $2.25 on Wednesday.

Logitech 2Q profit up 39%, lifts FY revenue outlook
LOGI said second-quarter net income rose 39% to $36.2 million and lifted its sales growth outlook for the year to the range of 18% to 20% compared to an earlier forecast of 15%. Sales for the second quarter climbed 28% to $422 million, driven by "explosive" growth in audio sales; operating income grew 29% to $38.2 million. Gross margins for the period slipped to 31.4% from 33.2% a year ago. Looking ahead, the company said it sees gross margin higher in the second half than in the first half and gross margin for the year at the lower end of its long-term range of 32% to 34%.

Finnish Nokia posts 29% rise in profit
NOK said third-quarter net income rose 29% to 881 million euros, or 20 cents a share, beating by a penny the average forecast of analysts polled by Thomson First Call. Sales rose 18%, with mobile phone sales up 15%. Nokia expects average selling price to be down sequentially in the fourth quarter, but added it anticipates increasing market share. Network sales in the fourth quarter are expected to be down sequentially and Nokia said profitability in the division remains under pressure.

SAP ups guidance after posting 15% profit climb
SAP German software giant and rival of Oracle Corp, lifted 2005 earnings and revenue guidance after posting a 14.8% rise in third-quarter net profit at 334 million euros, with revenue rising 12.9% to 2.01 billion euros and license revenue rising 20.1% to 590 million euros. The company said its worldwide market share rose to 60% at the end of the third quarter from 58% at the end of the second, and U.S. market share rose to 44% from 41% at the end of the second quarter. SAP now sees license revenue rising 12% to 14% in 2005, from a previous view of a 10% to 12% rise, and said proforma EPS should rise to 4.85 to 4.95 euros a share from an earlier view of 4.70 to 4.80 euros a share. SAP now is forecasting its euro exchange rate for the year to be at $1.25, from an earlier assumption of $1.30.

OptionsXpress net income more than doubles
OXPS reported third-quarter net income of $12.7 million, or 20 cents a share, up from $4.9 million, or 9 cents a share, in the year-ago period. A survey of five analysts by Thomson Financial forecast earnings of 20 cents a share for the options firm. Shares rose 25 cents to $19.19 on Wednesday.

UPS earnings rise 7%, revenue up about 18%
UPS reported third-quarter net income of $953 million, or 86 cents a share, compared with $890 million, or 78 cents a share in the year-ago period. The package delivery company said sales rose 17.9% in the three months that ended Sept 30 to $10.55 billion from $8.95 billion. Analysts polled by Thomson First Call predicted UPS would post an 86 cents a share profit and revenue of $10.39 billion. UPS said its 2005 earnings would rise 18% to 20% per share compared to the $2.90 a share reported in 2004. Earnings in 2006 would rise 11% to 16%.

Alaska Air profit climbs, tops forecast
ALK said third-quarter net profit climbed 22% to $90.2 million, or $2.71 a share, with revenue up 10% to $845 million. Excluding accounting changes, refunds of navigation fees and restructuring activites, adjusted earnings rose to $2.16 from $1.58 a share. Analysts polled by Thomson First Call were expecting earnings of $2.12 a share. The airline noted that third-quarter load factor, a measure of traffic to available seats, rose 3 percentage points to 79%.

Southwest earnings and revenue rise above expectations
LUV reported third-quarter earnings of $227 million, or 28 cents a share, up from $119 million, or 15 cents a share in the same period a year ago, boosted by strong growth in passenger revenue and load factors. Excluding non-recurring items, earnings would have been 21 cents a share, exceeding the average analyst estimate compiled by Thomson First Call of 18 cents. Revenue rose 19% to $1.99 billion from last year's $1.67 billion, vs. analyst forecasts of $1.96 billion, amid 19% growth in passenger revenue, a 14% increase in freight revenue and 32% growth in other revenue

JetBlue Airways net falls 67%
JBLU reported third-quarter net income of $2.7 million, or 2 cents a share, down from $8.1 million, or 7 cents a share, in the year-ago period. A survey of analysts by Thomson First Call forecast a loss of 1 cent a share for the airline.

McDonald's net falls, matches estimate
MCD said third-quarter profit fell to $735.4 million, or 58 cents a share, from $778.4 million, or 61 cents, a year ago. Earnings matched analysts' average estimate, according to Thomson First Call. Revenue for the three months ended Sept 30 advanced 8% to $5.33 billion from $4.93 billion a year ago, and ahead of analysts average view for $5.25 billion in revenue. In constant currency, revenue grew 7%.

SBC's net income falls; record DSL accounts added
SBC said third-quarter profit fell nearly 41% compared to the year-ago quarter, when the company reaped a large onetime gain from the sale of several Yellow-Pages operations. The company posted net income of $1.25 billion, or 38 cents a share, down from $2.09 billion, or 63 cents, a year earlier. Excluding onetime items, however, earnings totaled $1.5 billion, or 47 cents a share, exceeding the 41-cent estimate of Thomson First Call. Revenue rose 0.3% to $10.32 billion, excluding the company's interest in Cingular Wireless. SBC added a record 528,000 high-speed Internet users.

Coca-Cola 3rd-period net up stronger-than-expected 37%
KO the Atlanta soft-drink producer, reported stronger-than-expected third-quarter net income and revenue. Profit rose 37% to $1.28 billion, or 54 cents a share, from $935 million, or 39 cents, in the year-earlier period. The consensus estimate of analysts surveyed by Thomson First Call was 53 cents. Coke's revenue climbed 8% to $6.04 billion from $5.6 billion. First Call's estimate: $5.95 billion. The latest earnings included a net charge of 3 cents. That breaks down to a 4-cent charge to write down Philippines assets and a 1-cent benefit related to the favorable resolution of tax matters.

Whirlpool's quarterly profit rises nearly 13%
WHR reported third-quarter net income of $114 million, or $1.66 a share, up from $101 million, or $1.50 a share, earned in the year-ago period. The appliance manufacturer's quarterly sales came in at $3.6 billion, up 9% from the prior year's $3.32 billion. Excluding currency, Whirlpool's sales increased by about 6%. The company said it incurred some $110 million in higher material and oil-related costs during the latest quarter. Analysts, on average, had been looking for earnings of $1.62 a share on revenue of $3.49 billion, according to estimates compiled by Thomson First Call. Whirlpool, which is in the process of seeking regulatory approval to acquire Maytag Corp. MYG, also affirmed its 2005 target of generating earnings in the range of $5.90 to $6.10 a share; Wall Street's average stands at $6.01.

As usual, good earnings didn't seem to matter to the market. About 2/3 of those who reported this morning exceeded expectations. That was rewarded with an early morning pop and a sell off for the rest of the day. The bigger problem is company guidance and there are too many companies trying to lower guidance for future earnings. The stock market is smelling a downturn in the economy and it's starting to hold its nose.

DOW chart, Daily

After a break below the uptrend line October 2004 (which was a break below its bearish diamond pattern as shown previously on a weekly chart), the DOW had bounced back above the trend line. According to another weekly chart I had previously shown, the one with a sideways triangle playing out since January 2004, this recovery back above the trend line was a buy signal. But after testing the broken uptrend line from April yesterday, the DOW dropped back below the longer term uptrend line. So we're back to a bearish picture. Confused? Welcome to the trading crowd--the hard move in both directions yesterday and today was traders covering--short covering yesterday and long covering today (probably many of whom were buying yesterday's rally). The short term pattern looks very bearish so be careful with long positions. A break below last week's low would be a confirmed break down (we could still get a big bounce after a new low but it would change the longer term picture to one that's not pretty for the bulls).

SPX chart, Daily

The SPX failed a test of both its 200-dma and its broken uptrend line so this one too looks bearish. It's still possible (especially considering the extra volatility present in the market) that we could see SPX make an attempt to tag its 200-sma (it tagged its 200-ema) at 1199. But if the decline continues from here, watch the 1160-1163 support area that could launch another bounce attempt back up towards 1200. Be careful in these volatile times.

SPX chart, 30-min

A little closer view of the SPX price action shows price may find support near where it stopped today. I may be out of my mind thinking about support after a sell off like today's but just in case this is just volatile whipsaws, and we get an up day tomorrow, this chart could help explain why price stopped where it did. An internal trend line along the highs since October 6th is where price stopped its decline. It's also just above the shallow uptrend line from last week's low. Short term charts are oversold so be careful chasing an early morning decline--it might reverse on you just like yesterday and this morning.

Nasdaq chart, Daily

The support-turned-resistance line at 2100 was essentially tagged today and then it sold off for the rest of the day, closing back below its 200-dma. That looks bearish. If the decline continues from here, watch for support first at its 62% retracement level at 2015 and then the uptrend line from August 2004, currently near 1970.

SOX index, Daily chart

The SOX was downright bullish today! OK, it only closed up +0.41 or +0.09%. But hey, it was green! The SOX left a hammer candlestick yesterday and then essentially a doji today. This is actually bullish looking. I'm not sure how to reconcile that with the broader market which looks very bearish. What it might mean is choppy (albeit very volatile choppiness) price action directly ahead. Watch this one for clues since the techs are usually leaders to the downside, or upside since they're a good reflection of investor mood.

Before looking at the banks and housing index, Freddie Mac (FRE) reported today that long-term rates are at the highest level in 15 months, and that the 1-year adjustable rate is at its highest level since July 2002 in the week ending Thursday. The benchmark 30-year fixed-rate mortgage average rose to 6.1% from 6.03% a week ago. The mortgage agency said its weekly survey also showed a rise in the 15-year loan, to 5.65% from 5.62%, and the one-year ARM, which averaged 4.89% vs. 4.85% a week earlier. "Despite the gradual rise in mortgage rates over the last two months, housing starts were actually up in September highlighting the resiliency of the housing market," said Frank Nothaft, Freddie Mac vice president and chief economist. And the only thing I'll add is I hope they enjoy it while it lasts.

Speaking of Freddie Mac, this from James Kunstler's comments earlier this month, "The combined debt possessed by Fannie Mae and Freddie Mac stood at around $3 <u>trillion</u> in 2004, equal to nearly half of the national debt. They are the only Fortune 500 company that is not obligated to inform the public if they get into financial trouble." Their debt level has increased since those figures so the vulnerability is even higher in the event a lot of homeowners decide they can't pay their mortgages anymore once rates get too high.

As Kunstler says, "The economic wreckage is liable to be impressive. If large numbers of house owners cannot make their mortgage payments, Fannie Mae and Freddie Mac, and by extension the federal government, would be the big losers. The failure of the GSEs (Fanny and Freddie) would make the S & L fiasco of the 1980s (a half-trillion dollar problem) look like a bad night of poker. The failure of the GSEs would pose a far graver situation than the LTCM flameout. It could easily bring on cascading failures that might jeopardize global finance. This time, the American public would feel the pain (which they did not in the 1980s). Basically the problems building up for the American taxpayer are the potential bailout of these mortgage GSE's, the Pension Benefit Guarantee Corp, and of course we need to rebuild New Orleans and Iraq, not to mention the myriad other benefits our governments (state and national) are responsible for. It could get painful.

On Monday (I'll be writing Monday's and Thursday's Wrap next week), I'll get into some more discussion about the signs of the bear that may be upon us. It's always more fun talking about positive things in the economy and market, and how that could lead to bullish things, but we have a responsibility to you our readers to talk straight, something you don't seem to find in so many media sources. We have no hidden agendas, no desire to push you in one direction versus the other, but instead only a desire to make you money, or at least save you money and if we're going to enter a nasty bear market leg down, we need to talk about that. So that'll be next week.

In the meantime, the banks gave us a heads up that all was not right in our economy by leading the way down. Interestingly enough though, they held up relatively well today and avoided the hard sell off we saw in the broader market. Oversold perhaps? Or just consolidating before the next sell off? We'll have to wait for the answer to that question.

BKX banking index, Daily chart

Reader Joe noticed a H&S pattern (very obvious on monthly chart) that has formed since 2004. Draw the neckline across the two lows in May 2004 and the recent October low (not drawn on this chart) and a break below it would give us a downside objective of 80 which is where the highs in the fall of 2002 are located. In the meantime price bounced hard up in the past week to the broken uptrend line from October 2002 through March 2003 (so this is a long term and important trend line). It pulled back from this test today and obviously a kiss goodbye here would be very bearish. The first test for the bulls is to see if it can stay above the recaptured uptrend line from May 2004, currently at about $95.20.

U.S. Home Construction Index chart, DJUSHB, Daily

The housing index is currently finding resistance at the top of the lower parallel channel. These channels have done a good job at identifying support and resistance so watch for either a recovery back above this line, where it will probably run into the 200-dma and top of its current down-channel (so up to about 912), or a continued drop that will eventually take it down to the bottom of its longer term up-channel, down near 780.

A report today indicated natural gas inventory rose 75 bcf to 3062 bcf, which was well ahead of the expected 55 bcf rise, and this followed yesterday's better than anticipated energy supply report from the EIA. Oil (December contract) dropped below $60 for the first time since July. Natural gas prices dropped over 4%, closing at 13.26 today, after peaking at $15.25 on October 5th. Gasoline wholesale price has dropped from a high of $2.065/gal on September 29th, closing today at $1.65. This is all good news for consumers. It should also be good news for the stock market (stronger consumer) but might the market instead be sniffing out lack of demand as the cause (weaker growth) for weaker energy prices? But some will say weaker growth prospects should get the Fed to back off its rate increases and that should be good for the stock market. See why I prefer to trade the charts?

Oil chart, December contract, Daily

Oil's break of the uptrend line, the bottom of the up-channel it's been in for about a year, and therefore significant if it holds below it, likely means it's headed to its 200-dma, currently at $56.85. At this point that's where it looks like it's headed. It could bounce back up at any time though and give that broken uptrend a test, and that could take it back above $60 and not mean anything bullish. Watch it's current down-channel for clues--it's at the bottom of it now and could find a little bounce.

Oil Index chart, Daily

The oil index is leading oil to the downside as measured by its 200-dma. The index looks like it might find support here--oversold daily chart while at support. If the decline continues then it will likely head to the bottom of its up-channel near 466.

Transportation Index chart, TRAN, Daily

I drew in another uptrend line from May 2004, attaching it to the June low and so far that's where price is finding support (and resistance at the previous uptrend line). Whichever one of these lines price breaks above/below should give us the next direction--either back up to its downtrend line or a drop towards 2005 lows. I'm thinking lower.

U.S. Dollar chart, Daily

The U.S. dollar keeps threatening to roll over but continues to hold up. But based on the bearish divergence at the last high, this looks ready for a pullback. I say pullback because I'm thinking it will find support at its 50-dma before heading higher again. The dollar should be in a multi-month rally still as it heads up into the mid to upper 90's before it starts its next bear market leg down.

Gold chart, December contract, Daily

Until gold breaks below $458 I believe gold has another push higher ahead. Watch the potential parallel up-channel for guidance. If support is found at/above $458 (which I think makes a good stop level, say $457, for longs) we should get another leg up and then I'll be watching for topping action as that could be THE high for gold for a long time. If price drops below $453 it would be a strong indication that we may have already seen the high.

No major economic reports tomorrow.

After the market closed we got Google's (GOOG) earnings which stole the show with good news, although again it didn't help futures in after hours. This is by no means the full list, but here are some of the after-market earnings highlights as reported by MarketWatch:

Google tops quarterly revenue and profit expectations
GOOG said net income rose more than sevenfold to $381 million. Excluding certain charges, Google earned $437 million, or $1.50 a share, topping analysts' forecasts of $1.37. Google also said it generated $1.578 billion in revenue. Excluding commissions it pays to distribution partners, Google reported sales of $1.05 billion, exceeding analysts' estimates of $942 million. Google rose 7% in after-hours action.

Affymetrix quarterly earnings slide; revenue rises
AFFX reported third-quarter net earnings of $8.71 million, or 13 cents a share, vs. $15.4 million, or 24 cents a share, during the same period a year ago. The Santa Clara, Calif.-based maker of technology for genetic mapping posted revenue of $83.4 million vs. $79.9 million. Analysts surveyed by Thomson First Call had forecast third-quarter earnings of 11 cents a share on revenue of $84 million. Additionally, the company said it now expects fourth-quarter earnings of 19 cents a share on total revenue of $123 million. The lower outlook includes an expected $15 million charge related to the company's pending acquisition of ParAllele and $3 million for ParAllele operating expenses. For fiscal 2005, Affymetrix said it now expects earnings of 66 cents a share on total revenue of $380 million.

Microchip Technology profit up; declares dividend
MCHP reported second fiscal quarter profits rose from the same period last year. Revenue for the period was $227.3 million compared to $220.7 million last year. Profits for the quarter came in at $65.7 million, or 31 cents a share, compared to a profit of $60.4 million, or 29 cents a share, for last year. Analysts were expecting a profit of 30 cents a share on revenue of $227.6 million, according to consensus estimates from Thomson First Call. Microship also declared a quarterly cash dividend of 16 cents a share, payable on Nov. 18 to stockholders on record on Nov. 3.

Cree earnings fall, beat estimates; revenue up
CREE reported fiscal first-quarter net earnings of $28.9 million, or 28 cents a share, vs. $34.9 million, or 32 cents a share, in the year-ago period. The Durham, N.C.-based semiconductor company posted revenue of $103.9 million vs. $95.9 million. Analysts surveyed by Thomson First Call had forecast second-quarter net earnings of 23 cents a share on revenue of $103 million. Looking ahead, Cree said it expects second-quarter earnings of 24 cents to 27 cents a share on revenue of $106 million to $109 million.

Xilinx quarterly profit dips; rev falls
XLNX reported second-quarter net earnings of $85.6 million, or 24 cents a share, down from $86.2 million, or 24 cents a share, in the year-ago period. Revenue at the San Jose, Calif.-based provider of programmable logic solutions fell to $398.9 million from $403.3 million last year. Gross margin was 61.4%. The company expects third-quarter revenue to be up 1% to 5% sequentially and for gross margin to be between 62% and 63%.

Profit triples at Broadcom
BRCM reported net income of $132.7 million, or 35 cents a share, higher than $43.9 million, or 13 cents a share, in the same period last year. Revenue climbed 7.5% to $695 million, outrunning Wall Street's estimate of $665 million. Irvine, Calif.-based Broadcom makes wireless chips for computer keyboards, mobile-phone headsets, cable modems and digital television video recorders.

SanDisk Corp. reports $107.5 million third-quarter profit
SNDK reported a third-quarter profit of $107.5 million, or 55 cents a share, on revenue of $590 million. During the year-ago period, the flash memory developer earned $54.1 million or 29 cents a share, on $408 million in revenue. By that measure, SanDisk beat the estimates of analysts surveyed by Thomson First Call, who forecast a profit of 35 cents a share on $524 million in revenue.

Capital One net up slightly, beats estimates
COF said third-quarter net income was $491.1 million, or $1.81 a share, compared with $490.2 million, or $1.97 a share in the year-ago period. Analysts polled by Thomson First Call had expected per-share earnings of $1.66.

Sector action today was universally red. The only green sectors were the SOX and networking index and they were barely in green today. But on a day like today, that was a major win. Everyone else was red and the leaders to the downside were the airlines, which was a little strange considering how much of a drop we got in crude. Lack of earnings performance by LUV was to blame. The other red leader were the energy sector, gold and silver, health, drug and pharmaceuticals and biotechs.

For tomorrow, two words, be careful. We're clearly experiencing increased volatility and for what's normally a quiet Thursday of opex week, today was anything but. Does that mean Friday could be equally volatile? It too is normally like a summer Friday and after yesterday and today traders might be off to the sidelines licking their wounds wondering why they never saw that Mack truck hit them. If we see light volume, that has its own risks, but it would also say both sides have pulled back and are warily eyeing each other to see who's going to blink.

If yesterday's bounce finished a 3-wave upward correction off last week's low, we should waste no time breaking to new lows tomorrow. But if we get any rallies that are followed by hesitating choppy pullbacks it will likely mean we'll head back up, even if only to correct today's decline. We could just chop around sideways. In reality it may not be a bad idea to sit back and watch this for a little bit to see who's in charge. As always, those of us working on the live Monitor will do our best to let you know what's playing out and hopefully we'll get some good signals for the next directional trade. It's truly a time to exercise caution and don't let a trade go too much against you as this thing can run! Good luck tomorrow.

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