Happy hump-day, everybody. Welcome to day two of earnings season, and day nine of the government (partial) shutdown. There's still no evident progress on the government's budget impasse, though we're starting to get the sense that both parties are now a little fatigued by the whole thing too. They've only got a week and a day left until D-Day -- Default Day -- though, so at this point I can see this standoff lasting all the way through the 11th hour. As for earnings, so far ... well, not so good. Alcoa (AA) ended up beating estimates of $0.05 per share with a profit of $0.11. That trounced the year-ago figure of $0.03. Family Dollar (FDO) did pretty well too, bringing home $0.86 per share, topping estimates of $084, and beating last year's $0.75. But, Yum! Brands (YUM), Costco (COST), and Fastenal (FAST) all missed estimates, and didn't exactly grow in a big way compared to the year-ago bottom line. All in all we'd categorize Q3 earnings season as a disappointment so far, though it's way too soon to be jumping to any conclusions. We've got a few more biggies in the lineup for the rest of the week, but even then the sample size won't be big enough to call the third quarter a success or a failure. Speaking of stocks, a couple of write-ups at the site caught my attention today that I think you'd like too. One of them is James Brumley's look at what he describes as another "buy the rumor, sell the news" weight-loss biotech trade. Remember how hot Arena Pharmaceuticals (ARNA) and VIVUS (VVUS) both were leading up to their big FDA announcements, and how cold each one got in the weeks and months following their respective good news? James is saying this stock is following in those same paths, which means it could be a great trade, but also a limited-time trade. The other commentary I recommend is John Udovich's look at Advanced Micro Devices (AMD). It touches on everything you need to know about the computer processor company right now. Seriously. It could get even the newest of newbies up to speed on one of the market's most important names right now. John dives into which manufacturers are dumping or adding AMD as a supplier, explains the deal with SeaMicro (that nobody understood at the time), and even touches on something a little scandalous. If the name Advanced Micro Devices seems more than a little familiarly linked to the SmallCap Network newsletter, it might be because AMD was one of the picks we were congratulating the SmallCap Network Elite Opportunity's subscribers on in May, when the service locked in a 73% gain on the stock. Not bad for five weeks' worth of work. And for what it's worth, the SCN EO is back in an Advanced Micro Devices position. Will the stock give 'em a repeat performance, and if so, where will John Monroe decide to sell it? There's only one way to find out - become a subscriber to the service. You can still get a free two-week trial to the SmallCap Network Elite Opportunity, just to see what it's all about. But, I don't recall ever telling you there are several choices of subscription terms to the SCN EO... monthly, quarterly, and annually. The annual subscription is the best deal in terms of value, but a quarterly subscription should give you enough of a chance to really put these guys to the test. Look at it like this - just one of the service's many profitable trades could more than cover your subscription price. Here's how to get a free preview. Or, copy and paste the following link in your browser: http://www.smallcapnetwork.com/?vmpd_ckstr[click_track]=SCN+Newsletter&vmpd_ckstr_redirect=/pages/SCNEO/v1/ The Bulls Tip Their Hand The market's saga continues. As if the overdue budget and the upcoming debt ceiling battle weren't keeping traders on edge enough, today we had to digest the possibility of Janet Yellen becoming your next Fed Chairman, errr ... Chairwoman. She's currently Vice Chair for the Fed, so she could hit the ground running. More than that though, she's actually been out in front of trends more so than the other Federal Reserve's chiefs have been. She's also been vocally pro-growth and pro-Fed-transparency. Truth be told, she's a lot like Ben Bernanke. Now, whether being like Bernanke is a good thing or a bad thing is up to you. I'll just opine this - Ben Bernanke wasn't a bad Fed Chairman, nor did he do a bad job (generally speaking). Where Bernanke tripped himself up, in my opinion, is that he chipped away at his credibility over time by constantly switching gears with his rhetoric. And, though it may not have been fair, once he was branded "Helicopter Ben" and the media as well as investors started to use the term on a regular basis, it just became a little too easy to dismiss or marginalize the guy. Yellen brings a clean slate of credibility to the table, which can only help. Honestly though, I don't know how much it's going to matter who's heading the Fed from here. In the meantime, the market didn't bolt right out of the gate today and make the immediate dead-cat bounce I was talking with you about yesterday. But, the bulls did linger back in after the bears took us just a wee bit lower this morning. In a lot of ways this morning's dip and subsequent reversal is even more bullish than a mirror-image reversal of Tuesday's pullback would have been. How's that? We've talked about it before so I'm not going to rehash the whole thing now, but today's bar was a decent (though not ideal) hammer-shaped reversal bar. [It may also qualify as a 'doji' bar, which still implies a reversal effort.] A hammer pattern just means the open and close are both nearer the high than the low. The end result is what looks like - ta-da - a hammer. A doji just means the open and close are right at the same level for the day; it's possible for one bar to be both. Either way, they matter because they loosely suggest a transition from a net-bearish environment to a net-bullish one. The volume spike to go along with today's hammer/doji adds to the reversalness (I know - not a real word) of today's action. For proof of that idea, you don't have to look any further back than June 24th when we saw the S&P 500 form a hammer-shaped bar after a deep pullback. Sure enough, stocks made an amazing 7% runup over the next two and a half weeks. That was also the last time we saw the VIX spike the same way it did yesterday. Point being, there are a lot of signs falling into place now that say a short-term bottom is being made. Like yesterday, that's the mental bet I'm still making here. I'm also sticking with my bet that the S&P 500 is going to have a tough time bouncing any higher than the 20-day moving average line at 1692 before rolling over again. After taking a long, close look at the Dow's chart today, however, I want to float another possibility out to you. The Dow Jones Industrial Average made the same hammer-shaped bar the S&P 500 did today, and also made a hammer reversal back on June 24th. But, it's pretty clear to me the Dow's more important ceiling here is right around 15,660, where the index topped out in early August and then topped again in mid-September right before the current pullback unfurled. The upper 20-day Bollinger band has played a major role for the Dow as well, and it's ready to cap any rally right around the 15,660 area too. Now, my expectation is still for a bounce that's no higher than the indices' 20-day average lines. For the Dow Jones Industrial Average, that's currently 15,256. If the 20-day moving average lines don't cap the rally though, I don't see the DJIA moving any higher than the 15,660 area before a fairly serious pullback knocks it down again. Just something to keep in your back pocket. We'll chat tomorrow.