Watch the Cat and Dogs long trades (under $5.00), you may see some action there.

If you look at the DIA chart, 

you see 2 bear flags. A bear flag is a bearish continuation pattern, meaning it is expected to resolve to the downside. On the DIA chart, but not the others, we do see a false breakout on bear flag one at the white box/arrow. These flags are so obvious and we know that 85% of the time obvious patterns get hit with false breakouts, it is reasonable to expect a false breakout here, especially because we are at an area of important support for the bulls which was broken today and we closed right above it.

This 3C chart

is a 1-minute chart of the DIA showing a leading upside or positive divergence. This is seen in the SPY and the QQQQ as well. So I'm pretty sure we'll see a breakout of that flag. Now how long that lasts , we'll have to wait and see. On the first chart of the first bear flag, it lasted an hour. This is more important as we are at an important support/resistance area.

So I'm expecting that move to occur, it doesn't bother me, it's just part of the game on Wall Street. This breakout from this flag does not in any way represent a threat to the big picture. It may in fact be a good trading opportunity for nimble day traders. 

So understand this is common, we have seen these false breakouts 3-4 times a day just looking at a few charts. This is a market maker/specialist of an HFT firm's way of making money, like I said, it's part of the game.

I think the situation we are seeing in the market is more serious then people may realize, see the post below with all the charts and see how strong the uptrend reversal was and how complete in many ways. I do not think that natural progression from bull rally to a reversal is going to see a "out of no where" big bull move. We'll monitor the progress of it should it come to pass, which I think it will early tomorrow. It may be a good opportunity to start picking up shorts many of you have been emailing me about.

I believe the dollar will be down tomorrow, but I see a not so subtle change in character taking place in the $USD. This would make sense. However as I said about the market, tomorrow looks to be a down day on the less important short 3C time frames, the more important longer time frames are where we are seeing this change of character, just like when we spotted it in late August. I was actually listening to a video on august 19th and I mentioned we were seeing some strange stuff happening so changes in character don't just happen in a day, they take some time and I think the reversal stage of this rally is pretty mature. As I said last night, you will find as many or almost as many up days in a bear market decline as you will see down days, again, it's just how the market works.

There are a lot of possible plays you can make with that informaion. I'll be adding more shorts probably tomorrow afternoon after I see where the best entry points are if we get a false run.

Until tomorrow....