9/28/2008: Thoughts before the market open

I am seeing quite a bit more bullish outlooks lately, and I must admit there are cases to be made for the bulls.

That said, I am still extremely cautious here. I personally don't find a need to call the bottom, and I do see some signals that can be interpreted as bearish.

Overall, however, things look undecided (just as the soap opera in the news over this bailout is). QQQQ, IWM, materials, oil, and the like appear to be in short term downtrends with lower highs and lower lows. XLF and SPY are stuck within a trading range. Only the Dow (DIA) appears to be making an attempt to break out. The VIX is still high and has not yet reversed. Until it meets my criteria of a new rally, I will not be very optimistic. Caution should rule the day right now. In my book, there is no need to try and think one is smarter than the market. In the battle between one's viewpoint and the market, the market always wins.

So my thought is to play it safe until the market decides what it wants to do. In my small and minority opinion, I think the markets are equally weighted in the bullish and bearish directions right now. Gold looks decent for a trade, but I do not trust it much further.

At this point, I will stick with caution.

I updated the SPY 10-min with floor pivots and made a few comments.

Also watch the shorter time frame charts like the 30-mins for formations of higher lows and higher highs. Right now the S&P futures are trading down near the 5-day (the pink line on the SPY 30-min), and it might be worth trying a long position there if someone were so inclined. I would advise a smaller position with a tight stop. Personally, I would buy call options equal to a stop loss.

Here is a link to a S&P futures chart.