Happy Thanksgiving week to all of you. We've got the indexes behaving nicely so far today with most all of your major bullish ETFs gapping higher on the open this morning. It's no doubt a welcomed change from the consistent pummeling the indexes have been receiving for the last couple of months now, however, in the best interest of objectivity, there's no need to necessarily run out and get overly excited at this point. Yes, we got a nice intraday wash and rinse on Friday, which was just what we've been looking for, and just like we also mentioned Friday, we're seeing some excellent follow through to kick off the new week here today, but it's important to remember a couple of key points. First, options expired at the end of last week, so it's quite possible much of the strength Friday and today can be attributed to a bit of a reset for the new options period which will expire on the 21st of December, the week before many will shut down for the Holiday Season. Secondly, nothing has fundamentally changed with our economic climate except some hopeful chatter, which means nothing at this point. Third, the markets have shed so much so quickly, it was only a matter of time before we got at least a few days of relief which has happened on three previous occasions only to have the downward trend resume like clockwork. And finally fourth, the market took out some key support last week to the downside, which is often a prelude to a nice sharp short-term snapback rally. I've circled the strong confluence area of support, which was broken to the downside last week in this daily chart of the NASDAQ Composite here. If you keep dunking someone's head under water over and over again, when you finally let them up they're going to be gasping for air in relief. That's what the indexes are doing right now. The true test will be what the markets do not only today, but how they react if a key trend line is breached to the upside. I've drawn a green trend line (should have made it red for obvious reasons) through the short-term tops ever since the indexes started moving lower back in late September. As you can see here, it's quite possible the Comp. will gravitate toward this trend line to kick off the new options period. On a test of that trend line, we can likely expect the Comp. to pull back once again, and that's where the real test is going to be. Like we mentioned last week, we'd actually prefer to see a big jump in the volatility with a sharp move lower that's met with strong buying interest without taking out another new short-term low. That would be a very bullish signal suggesting the worst is over at least for the rest of the year. However, even with that sort of healthy reversal indicator, it won't necessarily mean the worst is over for the mid to long-term. We've got a lot of damage control that needs repairing before we're going to be convinced stocks are moving higher into the first quarter of next year. As a matter of fact, we'd have to see the Comp. breach at least 3049 to the upside before the bullish argument would get real interesting again. Earnings still continues to be a big concern with the S&P 500 unable to even match its third quarter earnings from last year. That's a huge negative only because stocks across the board are still much higher now than the same period a year ago. If stocks were at the same levels right now as they were at this same time last year, that would make much more sense. It's a divergence that can't be ignored. On the flip side, where's money going to go even if earnings continue to wane? Bonds? Real estate? Both of those options don't appear to offer much in the way of returns, especially since real estate is rapidly approaching a point of very logical resistance. Look at this weekly chart of the Philly Housing Index. As you can see, we're fast approaching some critical logical resistance which is most definitely going to reveal just how real the recent bullish activity is. So, although stocks don't necessarily deserve to be where they are now from an earnings perspective, it's quite possible the argument for stocks to artificially start moving higher once again on speculation could be in the cards. For now, we'll set our short-term target on the Comp. at 2958, roughly 60 points from current levels. That's a very nice trading range to scalp some short-term profits, however, depending on your timeframes, don't get married to anything unless you're a long-term investor who is willing to stomach the possibility of the markets moving lower while you can continue to build your long-term positions. Yes, after everything I've said here, adding stocks to your long-term positions is not a bad idea around current levels. Whether it's five months or five years, stocks will more than likely achieve new highs before it's all said and done, but if you're a short-term player, continue to be opportunistic and scalp profits early and often until we confirm a solid reversal signal. Friday and today was a great start to the process, however, we're not out of the woods yet. Black Gold Heats Up Our oil trade couldn't be going any better right now. I've included a daily chart here of the price of LS Crude. We suggested purchasing either USO, OIL or UCO last Thursday right near oil's short-term lows. So far, that entry Thursday proved to be the perfect risk/reward opportunity to make some nice profits when the rest of the market was painting a pretty ugly picture. More proof you can make money in any market environment, you just have to be willing to look around and spot the opportunities. We caught oil at its short-term low right on the button, so let's make that same entry our stop loss for now. There's nothing suggesting we should get out at this point. As a matter of fact, I wouldn't be surprised to see oil move toward $94 per barrel before it finally runs out of steam. I've circled a very large confluence area most traders would think is going to serve as a great level to short oil. However, reference my commentary above to see what happens with those type of levels these days. The market loves to take out these areas I've circled in an effort to prove traders wrong before they actually make the move traders were anticipating. Make sense? With everything going on in the Middle East right now, it's the perfect storm for the price of oil, however, the chart represents my best argument as to why oil is doing what it's doing. If oil can get to that $94 level, you will have made some very good money assuming you jumped in last Thursday when many traders were thinking oil was headed lower along with the rest of the market. Just remember, anything can change quickly and the best entry points often require timely action, so make sure you don't miss another edition! It takes you all of less than five minutes to read our newsletter each day and if you're serious about making money in the markets, ours is a must read.