Market Will Test 100-Day MA – Quad Witching Could Spark Selling – Watch the Close

Posted 9:30 AM ET - The market is resting just above the 100-day moving average. There isn't any news to push us below that level today. However, if we see persistent selling and that level fails with ease, prepare for a dip down to the 200-day moving average. This would be a bearish sign and it would indicate persistent non-news driven selling. I would buy puts for an overnight position if the 100-day moving average fails and if we see heavy selling into the close. This is a quadruple witch and once the momentum is established it often feeds on itself. The more likely scenario today is a drift lower and a bounce off of SPY $212. We might even see a half-hearted rally into positive territory after we probe for support. We are seeing profit-taking and we are also seeing a decent bid when major support is tested. I believe this type of price action will continue the rest of the year. Traders will wait for the FOMC statement next week and then they will wait for the next meeting in November. After that they will focus on the election. Once that passes they will wait for the December FOMC meeting. This game of "wait and see" will keep the market on edge. We should see decent volume and volatility. I don't have a good read on the market. If we break down today there will be technical confirmation and I will be prepared to take overnight short positions. I have been carrying a large position in BZQ since the Olympics. Brazil is in dire straits and weak global economic growth will pressure commodity prices. Any hint of a rate hike will hurt emerging markets and Brazil will be at the top of the list given its credit issues. Apart from that I am day trading. We have been able to find excellent bullish trades each day this week. When the market pulls back, relative strength is easy to spot. These stocks want to run and as soon as the market finds support, they take off. This will be our strategy again today. It's hard to abandon this tactic when it is working so well. I'm not overly anxious to swing trade because the market still feels very choppy. Watch for support at the 100-day moving average to be tested today. If we close below that level and if we see selling pressure in the last hour, buy some puts. Do not go overboard. I am back to my normal trading size. I had reduced it during the summer. Now the volume is back and trading has been brisk. . .

Daily Bulletin Continues...