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Stocks End October on a Sour Note

|Includes: DIA, QQQ, SPDR S&P 500 Trust ETF (SPY)

Economic news was mixed this morning, but selling in Europe was the focal point once again. The two o’clock hour brought on sellers as the market looked to wrap up one tremendous October. The month was one for the record books. Volume on the NYSE came in higher on the day with the NASDAQ coming in a bit light. However, it was the S&P500 getting stopped in its tracks and reversed from the 200dma is most notable. This type of action is not ideal and is a warning for longs in this market. Volume didn’t pick up until the end of day, but overall price action was pretty negative. We have a big warning signal and we’ll look to cut losses quickly if this market does turn sour on us.

This was one heck of an October for the markets. October 3rd market session was certainly something to remember as it appeared the market was going to go bust. Tuesday, October 4ths market rally off the lows in the final hour of trading was nothing short of amazing. The month was one for the record books as short sellers were handed hefty losses. It pays to keep losses small. This is why we always preach a sound cut loss strategy and never fight the tape.

This weekend’s snow storm in New England was for the record books too, and it appeared it help sour the market mood. However, it was Europe once again as many begin to digest what the European Union has put forth in its plan to “stabilize” the region. Piling on more debt to solve a debt crisis doesn’t appear to be a solution that would cure the problem. At any rate, it is far too difficult to time the market simply on this information. Using discipline with price and volume action is paramount. Today’s SPX reversal off the 200dma is VERY telling and we’ll need to recapture the 200dma with vigor if this market wants to stay afloat.

Until the last two hours of the market session it appeared we were headed for a healthy consolidation. However, the final two hours showed something else. We’ll react accordingly, but will you?

Stay focused and disciplined!