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Perhaps it is better to be irresponsible and right, than to be responsible and wrong.

Winston Churchill

The COT index number takes a big tumble this week coming in at [-17.2%] which is a 30% turnaround from last week. With the market on a pattern basis making a bottom pattern that then failed, this could well have some significance.

Seasonal

With September confounding the bears, possibly October will provide them with the declines that they thirst after. October has had some real bad months in there historically speaking, we’ll have to wait and see whether this October is going to be one of them.

Technicals

The 5day chart has turned into a downtrend. With the close on Friday there is no particular bias to the open on Monday. Higher/lower both carry about the same probability.

The 10day is showing a consolidation type of pattern.

Only when we move out to the 15day do we have a chart that suggests higher prices are still a possibility. First, price could move lower. Support rests at $168.2o’ish. We then encounter the rising trend in this higher timeframe.

Had we had a stronger COT number, I would have been more optimistic with regard to the bullishness of the market. Last week we did have the weakening internals. The internals remain in bear territory this week also.

On this basis, I would trade defensively. All of the market neutral positions are of course indifferent profit wise to the fluctuations in the market and allow positions to be held until a sustainable trend in the various stocks develop.

Political

While I have no illusions as to the eventual outcome over the shenanigans around the debt ceiling, how many times do we have to live through this nonsense, the market [may] be taking them into account. I remember in last year’s fiasco the COT numbers weakened dramatically, and when it was all over, roared back. It would seem that the same pattern is about to replay.

Fed

Are still pumping money into the market. That money is going to flow to something. It’s possible that it’s currently flowing to bonds, yields are on the way down, but there really isn’t much upside to bonds. Eventually, and sooner rather than later, Fed cash will again flow towards stocks.

Trade

Entered Trade

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