Update 10/29/09

Tomorrow is the 80th anniversary of Black Tuesday, one of the most famous one-day crashes in stock market history. This might've been a bad omen as today the market made a wide-ranging move down (its third in four days). Remarkably, this plunge was done steadily; there weren't any waterfall declines. Just lower lows and lower highs. We may get a bounce tomorrow. But if the trend has truly changed—and it certainly appears to have done so—these bounces may be disappointing. Let's take a look at March when the medium-term trend changed from bear to bull:



I've used arrows to denote the pullbacks. Note that the initial pullbacks only barely entered the prior days' ranges; they were shallow and over with quickly. It won't necessarily play out inversely this time, but if it does, bounces will be very difficult to play (and for purposes of this system, not worth it.) Also of note, we actually got our big bounces last week, when the S&P rose from 1075 to 1095 and then again from 1075 to 1090—typical behavior prior to "the point of recognition." If we assume today is such a point, the next bounces we see may end up being sideways, e.g., 9 points instead of 20-25.

The possibility exists that the bear market rally has not yet finished. The major indices still have uptrending moving averages, even though price has fallen below the 50. So stay humble and continue to use sell-stops. We bought all of yesterday's ideas, but since two of these were re-ups, there's only going to be one new entry in the table.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Addl Exit Guideline	Chart
TWM	27.58	31.64	+14.7%	28.63	N/A	Chart
DUG	12.33	13.28	+7.7%	12.28	N/A	Chart
EEV	12.42	14.01	+12.8%	13.11	N/A	Chart
DXD	33.51	34.39	+2.6%	33.12	N/A	Chart
SDS	38.78	40.96	+5.6%	38.79	N/A	Chart
QID	22.51	23.72	+5.4%	21.93	N/A	Chart
SRS	10.21	10.87	+6.5%	9.86	N/A	Chart

No official ideas for tomorrow. But if you feel light on short positions, you can try entering any of the current holdings on a pullback (i.e., market bounce), risking to the sell-stop listed in the table. The strongest charts of these are SRS and TWM; they're both around their October highs. SKF is another strong chart; on a pullback with that one, risk to 24.96. The flipside is the idea that DXD, being the laggard, has the most potential to "bloom" should it decide to follow the performance of its peers.