9/4/2007 9:24:13 AM

Trade recommendations:

We are holding off another day, due to a possible reversal today (Tuesday).

Discussion:

There hasn't been a definitive move to signal a short term top, but some of our indicators are showing this latest push is extended. From a candlestick standpoint, the QQQQs (representing the NASDAQ-100) put in a doji at a level commensurate with a double top (dating to August 8th). The Dow and S&P-500 have both put in a series of lower highs and may be about to turn lower yet again. The Russell-2000 nearing the top of a trading range established during the recent market correction.

The key here is that volatility has increased while trading volumes died down. With the big money players returning from their summer holidays, it is likely that volume will kick in and will begin to move the market. The question, of course, is which way.

The market have been ignoring potential bad news, as it relates to further concerns about a credit crunch, as various funds continue to struggle and are raising cash to meet margin calls, etc. In other words, optimism has returned to Wall Street, which lends to a bullish overtone. There may yet be another shoe to drop with another round of selling for hedge funds to meet redemptions and margin calls. If so, look for further volatility until the last of the significantly selling is put behind us.

Let's watch trading action today to determine if the bulls can, in fact, push the markets higher and finally break the cycle of lower highs.

Open Positions:

None at this time

Conclusion:

We will delay new entries at least a day.