By Mike Paulenoff, MPTrader.com
As you know it's a partial holiday with Columbus Day, and the markets are certainly very quiet and very slow. You have the banks closed today as well as the bond market, so with that side of the financial world enjoying a day off the equity markets are left to their own devices. Although this morning had a bunch of downgrades in technology and a bunch of earnings come out, there hasn't been a whole lot of movement in the E-Mini indexes or in the QQQs.
All those indices are higher, however, and extended Friday's gains, and continue to act relatively buoyant. However, as you know, our work argues that if you have long positions in these indices or have stocks that mimic the patterns created by these indices, you should be either taking profits into these levels that we see today or you should be raising stops at very tight levels. In fact, I would raise stops at this point to just under the low of the session. That is to say, under 35.08, for instance, in the QQQs, I would be out of there. I would be out at under 1040 in the E-Mini December S&P, and at under 1407 in the E-Mini December Nasdaq.
It's very quiet and that old adage "never short a quiet market" may, in fact, be what's dominating the market today. Barring that, it looks to me that the indices are losing underlying momentum. The patterns carved out from the September 30 lows all look mature, which leads me to believe that all the indices are extremely close to moving two ways, as opposed to the one-way market we've seen for the last three weeks.
So it's time to be very careful. I wouldn't necessarily be out of the market totally, but I would have very tight stops and I would be looking for some sort of reversal in the next 24 hours.