Sentiment Shifts on the Lowest Consumer Confidence Reading Ever!

Consumer Confidence was expected to come in at 52 today, instead, it hit the lowest reading since the inception of the report in 1967, falling over 23 points to a reading of 38! This can't be good for John McCain's campaign as the Obama campaign has managed to paint him as Bush III, remember the first Bush lost out to Clinton on “It's the economy stupid!”

However, the Q's, since that's what we've been focused on lately, retested that $29 area again and confirmed what I mentioned yesterday, Friday's temporary break of support was indeed, Scenario “C” that I've been talking about-BEAR TRAP! And just to prove it, take a look at this one minute chart. Here are the first two sentences from my post this morning at 8:15

“futures look encouraging. If you see a rally with few significant pullbacks, you'll know that the shorts are trying to cover. I'll follow up later.”


The vertical price acceleration after 2 p.m. today is exactly what I was talking about-typical short squeeze action!

So what do we have now? A breakout above the descending triangle, which was the most ominous development on the chart.


The breakout came on impressive volume, now lets see what the first pullback will look like and if we can sustain a pattern of higher highs and higher lows. Price Volume relationship was very strong with better than 2:1 Price Up/Volume Up over Price Up/Volume Down and nearly 5:1 over Price Up vs Price Down for all NYSE stocks.

If you have been a buyer of the Q's around $29 as I've been talking about for the last 5 days, you just made 10% in a day! And whoa if you bought the QLD! Drop something in the Tip Jar!

Remember this chart?



My 3C indicator above on a 15 minute chart-days ago this was calling accumulation!

So was the move broad? Yes-All 10 economic sectors posted a gain of at least 7.5%

A couple of things to point out-1) and this came from the Contributor's letter back in early September: “October tends to be the month that kills bears”, but lets not get ahead of ourselves here, there's still a lot of work to do. And 2) The market seems to do this time after time, sell-off just before earnings in an effort to price in worse than expected numbers and then rally when they come in on target or a bit better.

For example, today BP (BP 45.52, +6.37), Valero Energy (VLO 16.83, +1.72) and Occidental Petroleum (OXY 49.77, +7.69) all posted better than expected earnings and the energy sector posted a gain of nearly 12%.

Materials sector was up better than 12.5% on better than expected from U.S. Steel (X 32.25, +4.43).

Telecom was up today over 13%

Want to talk about a short squeeze? The German index, DAX gained a whopping 11.3% because of Volkswagen. VW was up better than 80% today and taken with yesterday's gains, VW is up 348% after Porche said they were increasing their stake in VW. Goldman Sachs got hit on rumors they were short VW, but they denied any significant losses, but someone took some significant losses on the short side there.

Was today the perfect storm? The Industrial sector was up 10% today as Boeing (BA 48.85, +6.49) popped over 15% after news that it reached a tentative 4 year agreement with the striking machinists union who have been on strike since the start of September.

These are not random events! There has been a shift in the market the last 4 days, we've been watching it everyday. It's not just the charts, it's the charts saying “Sentiment is shifting”. Perhaps because the election is near, perhaps everyone is just plain worn out, who knows? However, Wednesday the margin calls will start rolling out on those shorts, so lets see what type of follow through we'll get.

One more thing, go back and look at the charts I posted over the last 4 or 5 days and note the rallies near the end of the day. Guess who those guys are?