The market continued its nasty downtrend today giving back the remainder of Monday’s gains and once again testing critical technical levels. Breadth was very poor all day and was so broad we had no clear leadership in any sector. Volume was generally lighter  than yesterday which may be a sign that the big sellers have already move to the sidelines and now it is the weak panicky individuals selling into the abyss.

We believe we are at a critical juncture in this market today as we have now seen three failed rally attempts after the sell off in early October. Earnings season is almost complete and that has yet to provide any catalyst to support a move higher. The typical bottoming month of October is coming to an end and we suspect many investors are starting to throw in the towel.

About the only positive that can be taken from today is the high level of negativity that is starting to creep into this market. Many participants are seeing yearly gains evaporate and we feel a level of disgust wafting through the air that is grinding down even the most optimistic of players. Our gut is telling us this is the precise action that causes bottoms and is exactly what is happening now.

We too are becoming disgusted by the action, but are giving some of our wood shed warriors room to move. Until technical levels are definitely breached the possibility of a snap is building and we already saw how quickly gains can be restored.

For now we are sitting tight and slowly building a long position in the QQQQ. The blood is running through the streets and time will tell if this was an opportunity or a warning.

Earnings tonight from MSFT and KLAC will give the market some news to react to tomorrow. With expectations so low it might not take much to bring in some buyers.

RevShark

LONG QQQQ