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A Broken Top

All 3 major market averages broke their tops today, suggesting that what once was a top may now become a bottom.  An important quesiton to ask for validation of top now being support is, "Why the break?"  The answer lies somewhere in today's events and validation will come from near term events as in the FOMC policy statment and housing data due in the next couple of days.

Today's uptrend resulted from postive sentiment as the "nonpolitical" business group that marks the start and end of a recession stated the recession ended in June of '09.  In addtion, positive sentiment from Europe regarindg Ireland and Portugal pushed the bulls on the field and was also fueled by Lennars better than expected earnings and IBM's 1.7 billion dollar acquisition.

Obama had a town hall meeting today and along with today's events the fundamentals haven't changed, but sentiment is siding with the Bulls.  The Housing Index report continues to show weakness, yet positive sentiment has overshadowed the negative.

Watch the FOMC policy statement for indications of a change.  It is expected that they will hold interest rates low and continue to print money to buy US debt.  The dollar will weaken, gold will rise.

Trade the trend, but consider a hedged position.


Disclosure: Stagnant on IBM with an Iron Condor using a 135 short call and 120 short put for October