Tuesday, November 2, 2010

Volatile Day Tomorrow

After the poor action yesterday, many expected more nervous action today. But the bulls gapped us up once again and, after a brief dip, we traded steadily higher for the rest of the day. Today, it looked like it was the bears that were nervous about jumping in front of tomorrow's big news events. Many folks are optimistic about the election and the Fed.

Personally, I don't think there is any trading edge at all in front of the big news events. We just have to wait and see what develops. Yes, the steady uptrend for the last couple months has created a good "sell-the-news" setup, but it is so painfully obvious it is tough to believe it is going to immediately work.

Even if we do see some selling tomorrow, I believe the dip buyers will be very active on any weakness and will not let the market roll over too easily. Bears who think this market is going to go straight down will probably be disappointed. In fact, there is a good chance that overly aggressive bears will end up serving as short-squeeze fodder.

It won't be easy to navigate this market tomorrow morning as we digest the election results and await the Fed decision, but we should have some very interesting action. If you are going to play, expect a high level of volatility and be ready to move quickly.

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