AheadoftheNews.com

Nice rebound today on average volume for the month (moving average on volume bars is 30 day), with a stall at 61.8% of yesterday (39.16). Above that, resistance is 39.50 and 39.63. That 2006 gap below is still open. We need another quick rally to get out of this huge inside day before bulls can breathe easier. This is still a very dangerous environment. There were some shoppers today, judging from the ISE equity, so it was not only short covering. NDX will need to hold that 1579/1580 mark noted earlier, resistance now turned support.
Today was also the last day of the quarter, adding a twist to the bounce, since right after cash close, futures dropped.
There is no telling where this will go, but banking on a lasting bottom seems a little premature. One more low to close that August 2006 gap at 36.77 followed by a sharp key reversal day would be more to my liking.

PM update(2):

NDX tags 1579.81, right at the resistance level I outlined earlier. Now we find out what bulls are made of. If you are going to initiate a short today, this is the spot (NQ 1586). Stops must be tight, though. I will update after the close.

PM update:

The rally holds as NQ/NDX/QQQQ push above weekly S2's. Next resistance is 1579/1580 for NDX (August 2006 monthly close). Always watch the leaders in futures on day like today, in this case NQ. VIX drops 40. ES 1158.50 is also key.

Morning update:

NQ does find resistance at weekly S2 (1564). ES only makes a .50 new high on that move. We should chop around until we get news of the bill. The VIX is finding support at its weekly R2 (40). Interim level to watch for ES is now 1144.50.
We have some opening gaps that have not been filled, ES 1118.75 and NQ 1512. For now, this rally is still in the dead cat bounce category. It's amazing that we can even use that saying with a 250 point DOW rally, but that is how bad yesterday's drop was.

The Euro is taking a big hit. Even the Yen is down versus the dollar. It's interesting to note that the dollar is finding more and more takers as we muddle through this crisis. The bill is now expected to pass, a bullish dollar implies a positive for the measure. At the very least, it means the US will lead in any recovery.

As a reminder, the ban on short selling financials end Thursday.

Open:

NO bill yet, but we have a bounce. Weekly S2's should be resistance. Watch ES 1136, previous low.
Consumer confidence at 10 (yes, there is other news).
David Tice is back in the spotlight, calling for DOW 5000: link. That usually means we are close to a bottom.

Pivots: link.

Note to readers:

We will be switching over to the new site in a few days (same URL). The only item that will not be functional right away will be the live monitor, as it needs to be tested when the site is running.
Newsletter subscribers do not need to take any action, the transition should be seamless (we hope). Thank you for your patience.

Marc Eckelberry.

Analysts clamoring for a higher VIX in order to confirm a bottom are suddenly very quiet as we hit a high of 48.40, surpassing 1998 and 2002 peaks.


The old VIX (OEX volatility), now VXO has seen higher levels in 2002, 2001, 1998 and 1997. In 1987, there was no volatility index, but calculation have been made that put it north of 150 (Vix and More).
Will today (and tomorrow's) action be remembered as a great buying opportunity, or the beginning of the biggest cataclysmic event since 1929?

All I know for a fact is that today's gaps will be closed one day: SPX 1215, COMP 2185, QQQQ 41.17. Futures: ES 1214.50, NQ 1677.

The Q's suffered the biggest percentage trading day loss ever. If you are trying to find the bright side, we almost killed two birds with one stone, that being the August 15 and 16 gaps, 36.77 and 37.70. We still have a little more to go on the 15th gap, but if we can somehow manage a comeback from these levels, it's a trade. I emphasize the word trade.

Closing sell-off. The DOW is now only 365 points away from 10K, support below that would be 9871.72, 61.8% retrace of the entire bull market and a 30% correction. Washouts are often a quick affair. If they aren't, the pain can be devastating.

I believe this is the single biggest trading day loss for NDX/QQQQ, 10.5% and 8.8%.

When the greatest bond trader of all time (Bill Gross) agrees with the greatest investor of all time (Warren Buffett), it might pay to listen. These men often have opposing market interests. Right now, they are in agreement. Read more from Barron's: link.

Sept. 29 (Bloomberg) -- U.S. stocks plunged and the Standard & Poor's 500 Index tumbled the most since the 1987 crash after the House of Representatives rejected a $700 billion plan to rescue the financial system.

The Dow Jones Industrial Average slid 778 points for its biggest point drop ever as $1.2 trillion in market value was erased from American equities. The MSCI World Index of 23 developed markets slid 6.9 percent, the most in 21 years.

Closing hour:

NQ is being pushed down to the July 2006 close (1518.75). That will need to hold, at least on a closing basis. QQQQ has another gap to close from August at 36.77 (8/15 gap 36.77/37.22). VXN is at 50.45, VIX at 47.84.
The Q's have corrected almost 33% from the highs. Again, stay calm and look for the opportunities.

Wire Reports | 29 Sep 2008 | 02:50 PM ET

Democratic leaders in the House of Representatives are going to try to move another financial rescue bill after a $700 billion plan was rejected in a House vote, a senior House Democrat said on Monday.

As he rushed into a meeting in the office of House Speaker Nancy Pelosi, Rep. Chris Van Hollen of Maryland, chairman of the Democratic Congressional Campaign Committee, said he expected the leadership to advance another bill, but that he had no idea when it would happen.

The House defeated the rescue plan after ignoring urgent pleas from President Bush and bipartisan congressional leaders to quickly bail out the staggering financial industry.

When the critical vote was tallied, too few members of the House were willing to support the unpopular measure with elections just five weeks away.

Stocks plunged on Wall Street even before the 228-205 vote to reject the bill was announced on the House floor. But after being down more than 700 points, the market pared its losses.

"I think they're anticipating that there'll be another vote." Bill Gross of Pimco told CNBC right after the vote. "Because if there is no package, there will be a tremendous hole in credit markets. This must be passed."

PM update (3):

The House does not have the votes to pass the bill and we get a massive drop pushing QQQQ right down to that August 2006 gap close mentioned earlier (37.70 or so). We bounce from there, now at 38.45. Was that the target after all? We will soon find out. Watch the ES move back up to 1163, now R. ES 1136 will need to hold on a retest.
QQQQ Dec 38 calls at 3 are a take. This is not the time to panic (it is in many ways, but for traders it's stay calm and work the flow).

Watch the vote live: link.

PM update (2):

Another bounce attempt to 1174 fails and we fall hard as we get to the 1:40 turn. ES lost 1158 support and now looks headed for a retest of 1136.

PM update:

Another flush, pushing ES to the 9/17 close (1163) and we are back at the 1171.75 level. There is still bounce potential, given TRINNQ at a whopping 7 high, an extreme to say the least. Watch that 1174/1177 level on any third attempt to break through to the upside.

Noon update:

QQQQ is working hard at holding 38.87 (NQ 1586) and ES 1171.75. Bulls are obviously fighting for these levels. Resistance for ES is 1174 and 1177.
RIMM has reached my buy target (66/67), but stops need to be respected on a day like today, or just stay out altogether from any longs.
The VIX has reached weekly R2 at 40 (39.99). If short, you need to be aware of the mid-day bounce potential.

Morning update:

We keep falling, QQQQ loses the August 2006 close of 38.87. There is an old gap between 37.70 and 37.99 ( previously discussed). if we really fall. But we are due for a morning corrective bounce. Watch ES 1171.75, support now turned resistance and QQQQ 38.87.

Open (2):

ES hits 1169 and we bounce. Watch 1171.75/1172.50 on a retest. QQQQ seems to hold 39 for now. Resistance will be ES 1187. 8 to 1 down volume day on NYSE so far.

Open:

Retest of overnight lows, and they don't hold. NQ loses weekly S1 (1619.25) and ES is trying to hold the 9/24 low of 1180.25. There was an easy short at the open from 1195, either close it now for +12 or lower your stops to 1193.25. The day will be volatile so I suggest trading in and out of it. If you are on multiple contracts, take partials and lower the rest to even.
We also have end of quarter window dressing.

Pre-open:

The Libor jumped to 5.22% overnight, a disaster for many loans out there. NQ is testing last week's lows and ES is barely hanging on to the 1195 level. Bonds have a bid. The one positive is oil, falling sharply as the dollar gains against the Euro.
This is also the day Morgan Stanley chose fit to downgrade AAPL.

Sept. 28 (Bloomberg) -- President George W. Bush and congressional leaders said they reached an agreement on a $700 billion bank-rescue package designed to revive moribund credit markets.

The week of 9/14 saw ES trade in a very wide range between 1136.25 and 1291.25. Last week, the battle centered around 1213.75, the 50% mark. Expect the same level to be important going forward, including tonight. 10 dma support is at 1205.75, trouble starts again below 1195.
For NQ, it's pretty straightforward: don't lose the March lows at 1668.75.

Pivots: link.

Friday's trading was a classic case of support being defined in the first hour of trading (1648/1650, resistance turned support, see the pre-open note on NQ). On the first chart (NQ 10mn), you see the support set up in the first hour and a retest at 15:00.
On the second, we have the NASDAQ advance/decline line, showing the same test.

Note the bullish divergence as we hit the closing hour (-1182 versus -1400). The long white candle with volume (note the moving average volume overlay) told you to stay in for the trade up to the opening gap close, regardless of overall sentiment. Of course, savvy traders also understood that no one would want to be short futures ahead of potentially adverse news on Saturday.
The big rewards are often at the open and the close, save your scalping/brackets for the lunch hour.

RIMM is barely finding support at 72 and noting confluence 200 weekly and 61.8% 2005/2007 around 67. That could be the ultimate destination. I would be interested in the stock at those levels.

Morning update:

9:57 a.m.

U.S. Sept. UMich consumer sentiment 70.3 vs. 71.5 expected

NQ manages a spike to yesterday's lows (1664.75), pretty strong resistance after a battle at the 1650 level. If we lose 1650, we run the risk of testing pre-open lows. A move above 1665 sets up a gap close (1680). As for ES, a brief move above 1200 was sold, now trading at 1197. but the action is choppy up here. Internals are very negative.

Pre-open:

Sept. 26 (Bloomberg) -- Republicans splintered over the proposed $700 billion rescue of the U.S. financial system, imperilling an agreement hours after a bipartisan group of negotiators and the White House said one was near.

The markets are speaking out and it is not pretty. Futures are down more than 2%, NQ 2.75%. Support is currently weekly S1 for NQ at 1634. For ES, 1187/88 is an important mark.
Gaps are ES 1213.50 and NQ 1680. Interim resistance for NQ is at 1650.75.

Pivots: link.

Close:

The rally in techs faltered as someone probably got word of the RIMM news (down 16% as I type to 80.55). We held 41.41 at the cash close, but after-hours, NQ is retesting the March low of 1668. 75. Bulls cannot afford to lose that level after getting it back the past two days.
Once again, the open was the smoothest trade.

PM update:

Still a healthy day for bulls. QQQQ traders: above 41.69, resistance is at 41.99 and 42.13. Support is 41.41. Swing target if bulls can hold support and close above 42.13 would be 42.75/42.90.

Morning update:

NQ closes the morning gap and moves back above its 5 dma (1681). ADVDEC lines stayed green. Bonds are off. The day is young, but so far bad news is being bought. Watch the levels mentioned pre-open.

Pivots: link.

Pre-open:

Big drop in durable goods (-4.5%) and oil tumbles, giving NQ a lift. Resistance is 1689.50, 1694 and 1699.75 (50% of the week).

Close:

Bonds getting a bid as they do every time TNX (ten year yield) gets above 3.8%. But the ZN (ten year note)chart looks bearish after losing the trendline on the 19th. The 200 ema is a must hold now.

Equities: buy support, sell resistance with a bearish bias as the debate goes on in Washington. SPX is now quietly trading under 1200.

SMH getting my attention as it bounced off 24 on 9/18 and holding so far. Risk below that is to 23.85. But we are entering the bargain zone.

PM update:

Critical levels to hold: NQ 1650.75 and ES 1183.25. Still a very choppy day.

Morning update:

Oil and gold take a hit as they fail once more to breakout from longer term resistance. That is helping NDX/QQQQ hold up for now. ADVDEC lines have worsened, but it is still a choppy environment with no clear trend yet. Semis, housing and retail are up, financials once again a drag.

The VIX has jumped out of the weekly band (for settings, see August 8th analysis: link) and as you can see, the upper envelope is now support (31.47). Weekly R1 is at 40.92, weekly pivot at 33.29.

Morning update:

Existing home sales came in lower, ES drops below S1 but makes it back to 1288. Bulls do not want to see this area sold again. NQ resistance is 1664/1666. I'm not sure bears will have the juice to break this down further today.

Pre-open:

Sept. 24 (Bloomberg) -- Billionaire investor Warren Buffett, calling the market turmoil ``an economic Pearl Harbor,'' said Treasury Secretary Henry Paulson's $700 billion proposal to prop up the U.S. financial system is ``absolutely necessary.''

``The market could not have taken another week'' like last week, Buffett told CNBC today, a day after saying his Berkshire Hathaway Inc. will buy a $5 billion stake in Goldman Sachs Group Inc. ``I think it was the last thing Hank Paulson wanted to do, but there's no Plan B for this.''

Existing home sales at 10, followed by oil inventories at 10:35. Speaking of oi, CL has a strong bid this morning, but is still holding under 110.

ES resistance is 1200.50, 1203.75, 1206.50 and 1210. Support is 1195 and 1188.
Dec gold is still facing 200 dma resistance at 906. Both oil and gold seem to be consolidating at highs, usually a sign of an upcoming breakout. If it doesn't happen, the drop will be swift.

Overnight session:

ES 1204 is still a barrier, although still up nicely. Bonds are bidding, so trading this overnight is too messy for my taste. We will pick it up at the open.

The same players a year ago: video.

SAN FRANCISCO (MarketWatch) -- Berkshire Hathaway agreed late Tuesday to invest at least $5 billion in Goldman Sachs Group, with billionaire investor Warren Buffett backing a Wall Street firm that's begun transforming itself into a more-stable banking business.
Street.com has the figure at 10B.

Futures jump on the news. Let's see if ES can hold above 1204.

SPX loses 1204/1206 support and we tumble down to last Tuesday's opening support 1188. Resistance was too fierce at 50% Aug/Sep (1222/1223). There are just no buyers.
ISE equity also jumped up to relatively optimistic levels. That might change soon. Doom and gloom is omnipresent as we await the next move from our legislators. I don't want to get too cynical, but it appears major market players are putting additional pressure on Congress by keeping equity markets down.

Sept. 23 (Bloomberg) -- Congressional leaders in both parties are struggling to find support among House lawmakers for a $700 billion rescue plan for troubled financial firms pushed by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke.

Morning update:

The rally is not very strong, AD Lines are somewhat weak, but still positive. ES is finding resistance at its 10 dma (1220). As is often the case when volatility drops, the best trades are at the open. Should ES lose 1213.75, we could get a retest of lows. I will update at end of day.

Open (2):

ES does not go any lower than 1206.50 and rallies up to overnight highs. NQ has not filled this morning's gap (1669.75) and is the strongest today. A change from yesterday. There seems to be an undrlying eagerness to step in, we will see if AD Lines keep improving.

Today's pivots: link.

Open:

Narrowing ES support to 1203/1204. If we hit that and hold, there is an upside trade possible.
Richmon Manufacturing index at 10.

Pre-open:

Sept. 23 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke warned lawmakers that failure to pass a rescue plan to take over troubled assets from financial firms would pose a threat to markets and the economy.

``Action by the Congress is urgently required to stabilize the situation and avert what could otherwise be very serious consequences for our financial markets and for our economy,'' Bernanke said in testimony prepared for delivery today to the Senate Banking Committee. ``Global financial markets remain under extraordinary stress.''

These comments sent a chill and bonds higher. Oil is definitely stalling at the 109 level. NQ is green, bucking the trend. ES low is 1206.50, still holding Friday' gap support.

Overnight session:

The SPX gap close from Friday could have set up a low for the week. ES 1205 needs to hold overnight.

Equities had their expiration day melt-up (read short covering) on Friday and oil traders decided today was their turn. On the last day of trading for the CL (light sweet crude) October contract, we saw an unprecedented 23 point jump that hit an exact high of 130, before settling at 120.

The November contract, stayed under the key 110 level (an indication that expected future supplies will exceed current supplies: for more on commodity futures read this: link). But it is the first close above the 20 dma in 16 trading days and long overdue. Putting up the 2008 fibs, 109.05 is 61.8% and a level oil bulls will want to hold. Next stop would be 116.35, 50% if this hedge play keeps rolling. However, given the lower price on each future contract (Nov, Dec), higher prices might be unsustainable. Furthermore, regulators are peering into this move as well:

Sept. 22 (Bloomberg) -- The Commodity Futures Trading Commission is ``closely monitoring'' the biggest ever gain in oil prices on the New York Mercantile Exchange for potential manipulation, the agency's acting chairman said.

``We are working closely with Nymex compliance staff to ensure that no one is taking advantage of the current stresses facing our financial marketplace for their own manipulative gain,'' Acting Chairman Walter Lukken said today in a statement.

Closing hour:

We are done with the CL October contract, which close at 122. November is still under 109. NQ retests the lows, let's see if that holds. SPX Friday gap close at 1206.51 could be the target if NDX 1698 fails again.

PM update (3):

Oil hits 128...we can only stare in amazement, a one day move of 23%. That is for the October contract which expires today. The November contract is at 109. The same pain there for expiration shorts than SPX on Friday.
NDX/QQQQ bravely trying to hold the lows.

PM update (2):

NDX/QQQQ close Friday's gaps and bounce. This could be what the markets were waiting for. Bonds are still negative and oil hits an extreme of 116.35 (50% 2008). Buying oil at 116 is no longer a hedge, it's asking for trouble, especially since EUR/USD is up 2% versus 10% for oil and 4.8% for gold.
Volume is light, everything gets exaggerated. CL (oil) Dec contract is trading at just above half of Friday's volume. We will probably get the usual last half-hour Nymex push (2 to 2:30).

The SPX settlement last week for the Thursday expiration ended at 1279. Lots of pain on Friday for those that left some bear credit spreads open Thursday.

PM update:

We hit lows across the board, so far overnights are still holding. The main culprit: oil charging above 109/110. No need to short banks, just buy oil. The problem has been shifted another one.

NDX low was 1701.98, Friday's gap close is at 1697.42. SPX gap close is at 1206.51, but we are far from that and still above the 10 dma.

Regarding ER2 quotes on IB (small caps e-mini futures), here is what IB communicated to me:

"ER2 is no longer traded on Globex. This contract has moved to NYBOT. The new symbol is RUT. To see data you need to be subscribed to view InterContinental and New York Board of Trade (Non Professional).The cost for this data feed is $1/month. To bring this symbol up on the TWS, type in RUT below the Underlying column, hit enter, select Futures, month and year -> then in the contract selection box, select TF, that is the mini contract."

Morning update:

XLF down 4.4%, oil up 4.26% at 109 resistance. They might have banned short selling banks, but that doesn't stop anyone from getting out of financials altogether and buying oil. This is putting pressure on techs, although for now the selling is contained. Overnight lows have not been tested.

Pre-open:

Sept. 22 (Bloomberg) -- The Bush administration widened the scope of its $700 billion plan to avert a financial meltdown by including assets other than mortgage-related securities.

NQ/ES holds their lows and in the case of NQ see some green. NQ support is 1729, ES 1238.75. The July low for NQ/NDX/QQQQ is still the prize to try and keep at the close. Bonds drop pushing TNX to 3.88%. Oil and gold have a bid of course. CL is at its 20 dma (106.05), with very strong reistance above at 109. Gold support is at its 50 dma (863.50). No economic data today.

Overnight session:

NQ hit a low of 1705.50 right at the open, closing Friday's gap (1709.50). Now back above weekly pivot (1717.50). ES gap close is much further down (1204) and not in jeopardy for now. Bonds are slightly off, gold is up (the "in" hedge).
YM traders, your Friday gap is at 10994, low so far is 11150, we are holding the 10 dma (11165).

Last week's crisis was seemingly resolved by government action. But was all of it necessary? Bailouts is one thing (let's face it, a run on the banks was a real threat), but banning short selling in financials? What was Cox thinking (what was he thinking when he banned the uptick rule)? Given the massively bearish internals, high VIX, gold rocketing higher, three month note at WW2 levels, TED spread above 1987 crash highs, investor sentiment at historical lows for months, SPX right at long term support, weren't we primed for a reversal anyway? In fact, it is very possible that some of the move we saw on Friday was a "natural" event, given the capitulative backdrop. Now that we removed the liquidity shorts provide in a key sector, we run the risk of hitting a dry spot (no buyers)ahead of schedule in what would have most likely been an orderly reversal. The SEC might have succumbed to fear itself, failing to heed FDR's famous warning.
Overnight futures will now become an important battle ground. Stay tuned.

Close:

NDX ends the day below the July lows, but above its 10 dma. The low of the day was the ex-gap open from March. That's the bullish part. The bearish part is that we closed inside the morning gap. Given that it is an unusually large gap, bulls still win the toss. Note also that gap above that needs to be filled (1833, for QQQQ around 45).

ISE closed way down there, especially the index side. After a brief round of call buying at the open, it was all puts most of the day. I guess folks are trying to short this whatever way they can. I will wait and see before riding that (still) very crowded bearish train.

PM update:

Resistance is the July lows for NDX/QQQQ/NQ (1765.50 for futures). ES resistance is 1258.50. AD lines are still very strong, it will be interesting to see where we close the day.

Day traders are going to miss the price swings of the past few weeks. It was historical.

Morning update (2):

ES 1235 held, hitting 1237.50 and bouncing nicely. NQ also found a renewed bid on oil dropping back down to 100. Watch ES 1249.25 and 1258.50 resistance. Support above 1237.50 is 1243.50. AD lines are very strong.
VIX/VXN still a concern, climbing on this bounce.

Ah, yes, those Wall street exec bonuses related to subprime deals: 33 billion. You can bet that most of that money is parked offshore, not in US banks.

Morning update:

The initial squeeze is calming down as the day gets older. NQ dropped to 1721.25, still shy of a gap close. ES is doing much better, thanks to financials and energy. So far, the 1235 level is holding. NQ will need to hold the 10 dma at 1733.25. Internals are bullish, with NYSE ADVDEC lines at +2200 and Nasdaq at +1500. VXN however has a bid and the VIX is not far from highs. Trins are also at or above 1. This could be a problem.

Full text of Paulson speech: link.

"The underlying weakness in our financial system today is the illiquid mortgage assets that have lost value as the housing correction has proceeded. These illiquid assets are choking off the flow of credit that is so vitally important to our economy. When the financial system works as it should, money and capital flow to and from households and businesses to pay for home loans, school loans and investments that create jobs. As illiquid mortgage assets block the system, the clogging of our financial markets has the potential to have significant effects on our financial system and our economy. "

Open:

We drop from the lofty highs, but this is also the end of option expiration week and all those call sellers are scrambling. Many could even be waiting for a drop, suggesting some support. The timing of the bank rescue was perfect. Paulson knew what he was doing. But frankly, who in their right mind was still short after SPX hitting 1133?
Gap closes are ES 1203.25 and NQ 1708.50. Watch ES 1258.50 and 1235 on a drop.
Paulson speaks at 10.

List of US financial stocks that cannot be shorted until October 2nd: link.

I know many folks out there are very upset at some of these measures and I am as well. But I also have mixed feelings, being a student of history. Bernanke did his thesis on the great depression and I'm sure Paulson knows the events that led to it well. In fact, the entire Western world remembers it well, this is why we are seeing a concerted effort to avoid an international banking collapse. Forget taxes if that happens, you will have to start growing your own vegetables to feed your family. The only question is did they overreact and is the crisis that severe? I think Hank Paulson is the best man for the job right now, we are very fortunate it is not an O'Neill or Snow at the helm. I will give him the benefit of the doubt for now. But this better work.

As for the Cox measure, did he really think this through? Banning short selling altogether is a mistake. Shorts provide liquidity.

We would also like to see is some accountability for those responsible for putting us in this mess in the first place (politicians that repealed basic banking regulation?) Maybe we should finance part of the debt with the billions in bonuses some of these folks gave each other. It will never happen, of course.

Pre-open:

We are setting up the biggest gap open since 9/11, but this time it is on the upside. YM up 424, ES 64.75 and NQ 86.50. Bonds are down 2.55%, pushing the yield on the ten year to 3.8%.
NQ resistance is the 20 dma at 1800. ES is past that, even above its 50 dma at 1260.

CNBC - The damage being done to stocks through short selling, where Wall Street’s most legendary institutions are losing value at alarming rates, could be the work of financial terrorism.Cramer’s been talking to the short sellers he knows, and that’s the theory they’ve been putting forward. His sources said that it’s doubtful that the market’s traditional short sellers are behind the negative action we’ve seen lately. So there is the possibility that someone else has been trying to wreak havoc in the markets

There could be some truth to this, but if J.C. knew the right guys (his "sources"), he would make better market calls. Nevertheless, expect it to be an animated topic of discussion.

Not only did we reverse from a DOW -150 to a +410 day, the after-hours is on a complete tear with YM up 206, ES 34 and NQ 35. It's a stampede. As we have seen many times before, a bear market rally can erase a week or two of selling in a day or two.
ES tagged 1239.50, 61.8% of september. Note Monday's gap at 1235/1258.50. We will probably cool down at some point, but anyone that left some bear call credit spreads open is going to feel some pain and regret not closing the position today. Obviously, many hedge funds played those options and are now scrambling to cover by buying futures. Let this be a lesson: always buy them back the day of expiration, never, ever let them ride in the hopes of a worthless expire. The settlement value for SPX options takes place at the open and there is nothing you can do about it other than buying futures.

The VIX could drop dramatically tomorrow on this global short attack and that in turn could deflate some gains on any long calls, even if you nailed the lows. It could be frustrating and a perfect examples why I prefer futures when directional (individual stocks is another story). Sometimes, I will even treat them mentally like an option, allowing myself more room. The reward is immediate and of course at all hours. This, of course, does not apply to selling options, an entirely different set of rules.

WASHINGTON -(Dow Jones)- The head of the largest U.S. hedge fund lobby group criticized a pending emergency order to require hedge funds and other large investors to publicly disclose their short positions in stocks each day.

Managed Funds Association President Richard Baker, a former Republican congressman, argued that the order, which could be issued by the Securities and Exchange Commission as soon as Thursday, could create more volatility in the markets by calling more attention to troubled firms.

Under pressure from Wall Street firms, SEC Chairman Christopher Cox this week launched an effort to stem a tide of short sales that are driving down financial firms' stocks.

Currently, hedge funds must disclose their short positions periodically.

More volatility? Really. I think he needs to try another angle.

As traders, there are many tools we can use to spot that flow of money and we can benefit from it. The trick is spotting the moment it dries up and not to be the guy left in the room without a chair.