Trade Ideas for 11/02/09

It appeared Thursday that the bulls may have dodged a bullet, but Friday reversed the prior day's gains and then some. We now have a rejection at the 50-day moving average in the S&P, and the Dow closing (narrowly) below its 50 for the first time since July. The possibility that the move down from the 22nd was merely a correction remains but becomes even more remote. The Russell 2000 is already on life support. If the nearer-term trends align with the long-term bear, be mentally prepared for powerful downside surprise.

In Elliott Wave terms, there are more than a few ways to count the move down from 1101 as a impulse wave. They tend to be variations of the following two counts:

The count on the left has the fifth wave down underway/nearing completion; the second count has the third wave underway/nearing completion. Next up, some kind of bounce. There's a positive divergence in RSI on the 30-minute chart between Wednesday's and Friday's lows, and in the recent past the slightest such divergence has led to monstrous rallies. The dollar has yet to make a higher high even as the major indices made lower lows, which is another divergence. Also, volume on the downside was high Friday, suggesting a selling climax. But if the bear market has truly resumed, down moves will extend. Putting it another way, if the market does bounce substantially on Monday, it would give more weight to the possibility that the move down has been a correction and not a serious resumption of the bear market.

That said, if the market does fall more Monday and closes near the lows, it would be a good opportunity to book partial (10-25%) profit in our existing short positions. In addition, I'm going to ratchet back the sell-stop on TWM and see if it can work as a longer-term trend holding rather than a trade. If you wish to continue treating it as a trade, use the alternate sell-stop.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Addl Exit Guideline	Chart
TWM	27.58	32.10	+16.4%	26.99	Alternate sell-stop: 29.99	Chart
DUG	12.33	13.60	+10.3%	12.28	N/A	Chart
SDS	38.78	41.41	+6.8%	39.08	N/A	Chart
QID	22.51	24.16	+7.3%	21.93	N/A	Chart

In case the market does bounce Monday, I have some long ideas. Be careful not to risk too much.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
ACF (Americredit)	18.19	17.49	N/A	Chart
KRC (Kilroy Realty)	28.02	26.86	n/a	Chart
CEF (Central Fund of Canada)	13.46	12.99	n/a	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.