R.C. Market Report 10.13

• Market Trend: Downtrend

• The market registered highest one day percentage gain on 936pts on the Dow today. I couldn't have asked for a more powerful confirmation to Friday's bottom call. Past 3 daily candlesticks on both S&P 500 and Dow look like a drawing cut out of a technical analysis book. A strong bullish turnaround so far. But it is too much too soon?

• Comparisons were being made to the 1932 depression when the market dropped 3000pts in 7 straight down sessions. And in just about 9-10hours of trading, we've gained 1500pts (already a 50% retracement). Heading into today's close, the market looked to be very stretched to the upside. At this point, I'd beg for the market to pullback on lighter volume instead of going madly higher.

• I've stressed the importance of money management in this environment because we are still in a primary downtrend. With the market indices gaining over 10%, today was the day to either 1) take profit and decrease long side exposure or 2) add a few shorts to your longs to hedge yourself. There's a clear separation between outperformers and underperformers so stock picking is essential. I've chosen to do the former and took about half of my calls off the table. But in a couple of days, another chance to bet on the long side may present itself. And for option traders, this opportunity will likely be more profitable with volatility coming down.