We ended up getting the reversal we mentioned yesterday suggesting stocks could be in a position to move lower. Even with the DOW's big early move yesterday, the top was still lower than any of the last two week's highs. Again this morning, the indexes started off on the bullish side, but as it stands right now, the DOW's top is still lower than even yesterday's, which is why the DOW's rounding pattern continues to be a bit of a concern to us right now. It's going to be interesting to see if the indexes can buck what we're seeing, which is absolutely possible considering the recent volatility. We also mentioned yesterday that the NASDAQ Composite's efforts to hold the 25X5 on the daily chart would be a tough nut to crack to the downside and so far, that's what we're seeing today. Tech traders are hanging on to that DMA for dear life as you can see in this daily chart of the Composite here where I've circled the COMP's attempt to try and hold this DMA (purple line). Basically, there's a lot of push and pull going on right now across the major indexes, but the bottom line is further downside could put stocks in a better position to benefit from third quarter earnings rather than rallying higher and pricing in potentially better than expected results, only to disappoint. If you're thinking there's a lot of mixed signals out there right now, it's because there are, so I thought we'd take some time today to clarify a few things and likely answer some questions investors are probably having. First, we need to share a little of our charting philosophy with you that you can even use for your own prowess and also better understand where we're coming from on a daily basis. All of us here should have been born in Missouri because it's the "Show Me" State. What I mean is unless a stock or an index is at a logical profit, resistance or support level, we're typically not interested in trying to overly speculate what happens unless certain signals confirm themselves. Whether a signal confirms a reversal or it's time for a continuing trend, having a strong arsenal of signal tools are key. Keeping too much guessing without context out of your analysis is extremely prudent because the markets are always right. Additionally, unless you are a very long-term investor, timeframes are probably the single most important aspect when deciding what to do with a stock or an options trade. Timeframes are hyper critical when it comes to options, as your timing must be impeccable, or you will most definitely experience an old fashioned butt kicking. However, for long-term fundamental investors, using charts can be a great way to peg an entry point, and even potentially an exit point, but other than that, as long as things are going well with your investment idea, what happens between your entry and exit doesn't quite mean as much when it comes to charts. Case in point, we may be extremely bearish on a short-term basis, but very bullish on a long-term basis. That's pretty much where we're at right now, but it's important to remember short-term, things can change very quickly. They can even change dramatically from the time you receive one day's newsletter to the next. Here's an example, I've included a daily chart of the NDX here. We would absolutely love to see the NDX take out the 2743 level to the downside. If and when that happens, we'll likely get very long very quickly for a short-term trade that may last anywhere from a day to a week. If that happens from the time you receive one newsletter to the next, our short-term trend bias may change that quickly. The other day, we published an edition titled "Are You Ready for a Big Move to the Upside?" The basis for that edition was geared toward the weekly charts, which are much longer-term in nature. And when we say longer-term on the weekly charts, we don't mean one or two weeks. We're referencing three weeks or more. When we reference monthly charts, we're not speculating on a one or two month basis, we're speculating on three months or more. With that being said, why do we think the markets are going higher within the next three weeks or so? Because there's nothing in the weekly charts suggesting there's a big enough selloff coming that would change what the weekly charts are telling us. If and when things change enough on the weekly or monthly charts to suggest the long-term bullish trend is off the table, we're going to let you know. Going back to the short-term. We mentioned a few weeks ago the indexes were at a logical profit taking level, but that was on a short-term basis. We also mentioned 3020 - 3058 or so on the NASDAQ Composite would be a great support level. The markets have zigged and zagged since then, but if you're timeframes are say a couple of weeks out, maybe you hang tight and see if we hit that support level on the COMP to get long. That's more of a swing trading mentality. Not a day trader, but also not an investor. Swing traders sit in the middle, hence the word swing because that's what markets do on a short-term basis. Then, aside from charting, fundamentals are much more important to a stock on a longer-term basis. Fundamentals, not charts are what drive stocks and indexes over the course of months and years, not days and weeks. With that being said, from a fundamental perspective, we are most definitely not fans of where our economy is. That's our strong opinion in short for many reasons. However, corporate earnings have yet to disappoint investors, which is more important than the landscape of the economy. If corporate earnings impress for the third quarter, the economy doesn't mean anything... yet. Yet is the big word, but it's important to remember a floundering economy could take months and even years before it starts to rear its ugly head and affect corporate earnings. So, as you can see, it's all about timeframes. And, when it comes to those timeframes, various fundamentals and/or charts play a bigger or smaller role when trying to accurately predict what's coming. We hope that answers some questions you may have and gives you better guidance as what you should be paying attention to in the days, weeks, months and years ahead. Like they say, it's better to teach a man to fish than to give a man the fish. However, we'll always work hard to try and do a little of both. I hope you're heads not spinning too much after reading today's edition because mine is. Have a great afternoon.