Just to Keep you on your Toes.

All things were looking sweet as Apple (AAPL) Pie until 3pm when the market hit an air pocket. Traders went scrambling trying to figure out which wing of the White House imploded! However, they were only to discover that the selling had no material news attached to it. The most likely scenario for the ugly reversal late in the day was that the futures market caught a large seller that provided a late Hallows Eve scare. Apparently a large institution took advantage of today's stellar health of the market to find liquidity.

Despite the late afternoon giveback the averages managed to close positive. Dow Transports were strong as well as the Semiconductors (yet again). Breadth was slightly positive and the volume moderate.

Did you notice how Google (GOOG) led the reversal to the downside today? As we warned yesterday the internet sector seems temporarily shaky with the recent action in GOOG largely to blame. Traders are returning home tonight wondering whether this is the beginning of the end or simply an anomaly.

Your friendly neighborhood Kcap Team would welcome a little more confusion over the next couple of days in order to set the stage for better upside next week. However, the recent characteristics of this market have been that just when the internals are pointing south, the dip buyers pounce more like a Lion than a Bull. It seems that healthy internals are being faded by profit takers and dubious internals are being bought by underinvested Bulls.

If You Held a Taser to Our Head:
With the Fed in our crosshairs next Tuesday, we unfortunately expect the market to refrain from any meaningful sell off. A few days of weakness before the FOMC meeting would be too sweet to pass up as a buying opportunity for savvy traders. Therefore we would not be surprised if traders trip over themselves this week to buy the shallowest of dips, preventing a meaningful pullback once again. Either way we have decided to stay aggressively long at this juncture. Overall, just thinking out loud but it's too early to draw a solid conclusion from today's late sell off…

Hope you traded well.

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