October Begins

Today was a picture perfect start to our forecasted October.  We saw a nice rally at the start of the day and then a fade with another rally to test the highs of the first rally and then a drop into the close.  For traders, this is a very nice bearish day.  This being the first day of the month, we should have seen a pretty strong day and we saw a modestly up day.  The market is tired and is ready to go down.  The momentum indicators we follow have not come up much in this little rally we had over the past week and just that is almost enough to give us courage.  We expect a down move here over the course of the next six to ten weeks with possibly a tradable low sometime around late November.  

Today’s news was dominated by the September ISM manufacturing report which showed an increase in the face of an expected downturn.  This did not make the bond market very happy and it traded down.  Of course, the dollar was up due to the market’s interpretation that interest rates would keep going up and that would mean dollar assets would be sought after.  The market’s wisdom is a little misguided sometimes.  Since we have taken our profits in the precious metals sector we aren’t going to argue.  We would like to see a pullback in that sector so we can get back into it later.

Then there was the other story about car, or should we say SUV and pickup, sales at GM and Ford, although they weren’t really picking up at all.  The slowdown was attributed to two things, one being the “employee discounts” that were offered in the months before and therefore reducing demand now.  And, the other being the surge in gas prices and some aversion to purchasing gas guzzlers.  Whatever the news, the market wants to go down.  Let’s get on that trade.  And speaking of that…

Just as a matter of record, we are going to report here tonight the early morning prices of the stocks we mentioned in our post last night.  The market was very generous this morning, allowing us to add to our short positions on a nice up opening.  While we may still see some upside over the next day or two, we are getting what we consider to be fairly good prices for our shorts.  Last night we mentioned several stocks and funds and for stocks we list the price about a half an hour into the trading session and for the two mutual funds, the only price available which is the asset value at the end of the day:

Low risk tolerance:
RYAIX    23.00

Moderate risk tolerance:
RYVNX    20.56
INTC         24.90      close      24.60
GOOG     316           close   318.68  (one little stinker)
RIMM        69          close     68.10
YHOO       34           close     33.76
JPM           34.40      close     34.19
AMAT       17.20      close     16.98
MER           62.40     close     62.19

High risk tolerance:
We mentioned that we would be available for questions on the options strategies.  We don’t think most of you should get involved with speculative option positions, but we do recommend a strategy if you are unable to sell your positions, covered calls or protective puts.  Again, let me know if you have any questions, put them anonymously in the comment section for all of us to read and comment.

Dow Industrials:  10,535.48   -33.22
RYVNX:  20.56   (our entry point as we mentioned last night)