On October 29th we penned a ‘Jo’ discussing technical “Quads” [Four momentum indicators pointing to a potential bottom] and how they combined with a technical pattern called a descending triangle. In addition, we pointed out seven contrarian indicators illustrating an overwhelming negative sentiment; another indication of a potential short-term bottom.

The combination lead to our “Weight of Evidence” probability of success risk/reward calculation showing a decent entry point for a secondary bull market rally in a continuing cyclical bear market.

Nevertheless, the last two sentences stated…

If for some reason this rally was to fail and break the recent bottom; well…… Look Out Below!!!! Hence, keep your stops tight and your sell tickets close.

Yesterdays closing action put all four sisters right at their lows for the year, tested the prior bottoms and made this mornings open quite a nail-bitter.

As we closely watch these aforementioned levels, we will not hesitate to pull the ripcord and return to cash, hedged or even bear position. For those short-term players that were looking for a bear market counter-trend rally, we suggest you revisit your stop-loss areas because a break here changes the market dynamics and the technical risk ranking. That being said, if the “Four Sisters” do hold at these levels we believe the shorts will be forced to cover and the market should begin the long awaited bear market rally.

For a longer-term chart of the next potential support area (760 – 780) for the S&P 500 please review our last quarterly report.

Until next time.

Sincerely,

Kevin A. Tuttle

CEO

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