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MV Weather Report: Expect Pullback Clouds to Recede in Fourth Quarter


Rain or shine, we review the day's biggest stock stories.


Yesterday, the week started off strong for the bulls but those gains were cut in half after a poor consumer confidence reading came out this morning.

For the month of September, consumer confidence came in at 53.1 vs. expectations of 57.0. The market was trading higher before the release but it sold off immediately, before spending much of the day going sideways.

For the day, the S&P 500 traded between 1069 and 1057 before closing down -0.22% to 1060.

Today on the Buzz and Banter, Professor Jeff Cooper gave his thoughts on tape.

" Volume has picked up on the downside since last week suggesting distribution. The big picture on volume shows decreasing volume on the advance for months leaving the nature of the rally suspect.

"Those expecting to see fireworks into quarter end should consider that many funds are gun shy about gaming their stocks in the day or two preceding quarter end.

"The bull case looks like an A B C or two step pullback to below last week's low. Why? Because the Weekly Swing Chart has not turned down and the angle of attack to the downside from last week's high implies that such a turndown should occur. A measured move from the first leg down of approximately 40 S&P points projects to the low 1030's."

To add on Cooper's points yesterday was the third lowest volume day of the year (thanks Professor Branden Rife from the Buzz) and with the end of the quarter tomorrow, was Monday mutual fund mark up day? In other words, is the pullback still here?

Professor Sean Udall told readers what he was doing on today's Buzz and Banter.

"I'm collecting premium (both call and put), and have increased liquidity exposure while still hitting trades on names like Qualcomm (QCOM), Natural Tandem (TNDM) or Palm (PALM).

"So while I would love to be adding more Google (GOOG), Sun Power (SPWRA), or Morgan Stanley (MS) I'm sitting tight as I believe we will see a downside day or two which would be the antithesis of yesterday's move.

"As for differentiation trades. I've added Bank of America (BAC) back as a long. Readers will know my banking thesis and from my perch these banks are nowhere near done rising. Especially, JPMorgan (JPM), MS, Goldman Sachs (GS) and BAC. They are indeed "earning out" the true write downs as I promulgated back this spring. I see 50-100% or more on every single one of them."

I have to say, I'm in Sean Udall's camp. A pullback for a few more days, maybe even a week of choppy trading, before fund managers realize it's the fourth quarter and they need to chase performance.

Have a great night!

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Position in BAC

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