By Mike Paulenoff, MPTrader.com
For the first hour of trading the market was under a bit of pressure, then it reversed to the upside. After the first hour of pressure, all the indices came down and either made marginal new lows below the Sunday night lows or held at levels right at Sunday night's lows, which happened to be the low for the decline that started in the middle of the month on Sept 18,
Since that time we've had a recovery rally. For instance, in the December S&P, we've had a recovery rally from about the 992-93 area up to 1004. In the Nasdaq E_Mini we've had a recovery rally from about 1306-08 to about 1330. Now these rallies, while they're countertrend, may not be complete. My work argues that we'll try to consolidate through the rest of the noon or mid-session lull, and then the bulls will try to take it up again.
The objectives for these moves in the E-Mini S&P would be in about the 1006-08 window, and in the Nasdaq E-Mini at about the 1334-38 window. After that, however, I think the markets will pull back again, and increasingly it'll become apparent that the rally we're in now is countertrend. That is, the dominant near-term trend remains down from the middle of September, and as we head into October, we're having a little countertrend bounce, and then I think we'll head down for another vicious down-leg.
So traders ought to be very careful about falling in love with any long positions here. The more nimble the better, and the ability to reverse out of positions into short positions is preferred.