We have a perceptional battle being wager here today folks…basically speaking it is for bragging rights over the weekend…a close over 8,443 and the bulls can tout all over the air waves 4th weekly green close in a row, an this would be perceived very well ahead of next week's elections. On the other hand the bad-news bears want a close under 8,443, so the headlines can read “November starts in the RED” with the market doing its first Red weekly close since the Oct. 10th rally.
Now I have some food for thoughts folks…it goes back to a risk/reward/greed equation Since almost everyone down to the neighborhood paper boy/girl believes that Uncle Al is going to cut rates next there will be a pile of so-called investors that will want to get in before the jump that happens historically after such a rate cute, just listed to CNBC, and they are professing such a move next week. Knowing this, the shorts may be relinquishing and covering their short positions until after the fed meeting. I doubt that they will want to be very short come Monday when Ma and Pa Kettle read the weekend paper and find out that a rate cut is almost assured. Let’s face it folks, If I had a buck for every time I thought I knew a significant drop was coming on Friday, and instituted an early short position, only to see short-covering into the late day close pump the close even higher, hence I am trying to saw…beware of the power of Shorts covering. From what I can see, after today’s dismal reports there's no more bad news coming to fuel a market drop in the very near term that I can see, that we have not already digested and for some reason the Pepto-Bismol has worked as we have not puked up the overvalued equities yet. Risk/Reward…why would someone stay short between now and Monday or Election Day?
Those traders who believe there will be a rate cut, and an subsequent market rally afterwards there is no reason to be short and every reason to be long. The keyword here is "believe" since the economic numbers today make that chance much less likely in my opinion, and as you all know I believe that we will not see a rate cut (I’m in the minority group). Ma and Pa investor are starting to dip their toes back into the shark infested waters…thinking rate cut is assured and I think some of today’s buying due to this but I think more relative is the "short covering" to avoid a positive surprise by the Fed. I have been warning about that in the QQQ all week. If we see some news seep out that changes the landscape to a "rate cut not in the bag" then I think you will see weakness return.
