Daily update

Here is a short for you on DIG (or you can go long DUG, the inverse ETF of DIG).

I'm a little more bearish after today's action than I was last night. A late-day rally is a great way to keep the news reports from reporting how bearish the day really was. We battled to get above 865 a good bit of the day and most of the day we were in a downtrend that looked like we were going to break down. I don't know where these buyers are coming from, but from 9:30 a.m. to 3:30 p.m., we were in an obvious downtrend channel. The volume was light today, down volume was 72% and decliners outpaced advancers by 2.8 to 1.

The VIX had a nice healthy comeback today, much in line with the day's action. We closed below the 20-day EMA and I'd call that bearish, but it was an inside day so we're not supposed to read much into it. We're getting pretty tightly wound in a triangle on the daily chart. On the way up, there should be some fun chop at 890 and 898. Breaking 900 would create some buying, and breaking 919 would bring out all the bulls in a buying spree.

With the Fed announcing interest rates at 2:15 Tuesday, the mood is more likely set by the tone than the rate, as the rate won't matter to the markets. We have three choices: (1) no rate cut (zero chance of this happening, the Fed would prefer that Congress' stupidity tanks the markets, not their own), (2) a Japan-like rate cut to 0% (also not likely, because the Fed would have to stop saying that we don't have the problems that Japan had [we do]), or (3) something in between, which the markets are expecting.

I heard something interesting lately that had me thinking. All hedge funds carried shorts and longs. What if they spend the whole months of October and most of November dumping their longs to get out of the momentum, but kept their short positions since they were working? And then, in late November, volume dried up and their short positions got a little bit squeezed every day for like two weeks. Could they fuel a rally, or are they simply providing a superficial bottom as they cover their shorts on each dip, which would cause all our highs to be lower (like they've been for six straight trading days)? Today we didn't make a lower low. If we take out Friday's bottom, adios muchachos.

Key datapoints for tomorrow: Pivot is 874, R1 is 891.5, S1 is 855. 20-EMA is 876. I think the ceiling is 895 and 855 is going to be tempting to test.

I'm thinking about quitting the blog business, it takes a lot of time and feels like I'm talking to myself. Leave a comment so I know you're out there.

Thanks!

Joe