Update 11/05/09

Volatile yet narrow-range Fed day featuring near-unchanged closes across the averages. Post-announcement, there were some rather extreme intraday divergences: the S&P up 10 points with the Russell in negative territory. The market usually has some trouble digesting the Fed data, or rather the reaction to the Fed data, on the day of. Regardless of the content, the announcement itself has become rather like the second opening bell of the day.

As far as a count goes, the bounce that began Monday has some room to go. Perhaps the market extends sideways for a couple days, or surges to the 1070-1080 range. A collapse from here is also possible, but it foreshortens the countertrend move to such an extent that I'd probably want to revise my count.

We sold a few shorts profitably but retained TWM as a trend trade. The Russell tends to lead the S&P, and its relative weakness has helped our position in TWM. Like the S&P, WX painted a gravestone doji today, and in my opinion it's not worth it to hold. The official recommendation for tomorrow is to sell it.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Addl Exit Guideline	Chart
TWM	27.58	32.08	+16.3%	26.99	N/A	Chart
CEF	13.46	14.01	+4.1%	13.49	N/A	Chart
WX	13.34	13.56	+1.6%	SELL	Alternate sell-stop: 12.66	Chart
ICO	4.36	4.33	-0.1%	3.99	N/A	Chart

The Elliott Wave pattern is forecasting a major price dislocation (crash) this month, maybe to begin next week. For the remainder of this week, I would start looking into buying non-equity guts options for December expiry. Guts options, or options that are well out of the money, are generally not good buys because they are lottery tickets. However, they do pay off tremendously in the event of a major price dislocation. If prices remain at this level next week, I would look into November guts options. You don't need to risk very much (and you definitely don't want to risk very much) to make a fantastic return. A more conservative approach would be to buy bear put spreads, and these work well for equity options. Some ideas for the underlying with respect to the non-equity puts are QQQQ, SPY, and XLF.