Analysis:
Today the fact that the market did not take out the 1,150 resistance is a surprise, given the backdrop of Unilever's acquisition of Alberto-Culver and Southwest's offer for AirTran, and to say that the failure of M&T Bank's merger with Santander outweighs the other two would be convincing to the gullible. Now the Bulls should consider taking profits, not because being bullish is wrong, but because the market has found its short-term top at 1,150 and will reach 1,120 before hitting 1,150. Looking ahead to tomorrow, the Case-Shiller Housing Price Index will bring a major disappointment that the Bulls may use to liquidate their long positions, and the Consumer Sentiment will be lower than the consensus, again dragged by the dim outlook for employment and dwindling household asset values including home prices, whose shrinking values will have been confirmed by the earlier Case-Shiller HPI, and stock holdings (because most retail investors did not catch the early part of the market rally since Sept. 1).
Strategy:
Hold short at 1,122 (Correction: The Strategy for Friday should have stated "hold short at 1,122 with a bias to exit short position" because otherwise it would have stated something along the line "offset short at 1,140 for a loss of 18 points." Mea culpa.)
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