Welcome to November, everybody. It's tough to believe we're down to the last two months of the year, isn't it? Regardless, it's here, so let's see if we can finish up 2014 on a high note. First and foremost, did you see JetBlue (JBLU) today? This was an idea I passed along to SmallCap Network newsletter readers back on October 16th after John Monroe over at the Elite Opportunity gave it to his readers a few days before that. It was up a rock-solid 1.7% today (around print-time anyway), but perhaps more important than that, it cracked a ceiling at $11.65 today and moved to a new multi-week high. From here, there's little else to pull it down or get in the way. I really think the V-shaped reversal effort coming out of the deep low from October 13th is going to take JBLU higher from here. Just as a reminder, while we got in on JetBlue move fairly early, Elite Opportunity subscribers got in even earlier, and as such are further along the profitability scale. That's the upside of being an EO member - you get trades before we get to mention them in this end-of-day newsletter. You also get a lot more swing trading ideas with the Elite Opportunity service than you'll get from me. If you need some more "action", the EO is the way to go. Click here to get a free two-week trial. Or, cut and paste this link: https://www.smallcapnetwork.com/?vmpd_ckstr[click_track]=Newsletter&vmpd_ckstr_redirect=/pages/SCNEO/v1 Anyway, what I really wanted to talk to you about today was an e-mail we got over the weekend. We've said it before but it bears repeating now.... we read every single e-mail you guys send us, and we respond where appropriate. When the response is worth sharing here in the public forum of the newsletter, we'll do so. This is what's happening today. We got a great observation regarding what's been going on with stocks of late, and we've got some important thoughts on the matter. Wayne writes: CNBC did a survey on the Friday before the big week last week. They asked if viewers thought the market would be up the next week. And this is when the market was getting hit hard on the downside. 75% said they thought it would be up. Plus the "correction" really never caused extreme fear as far as I could tell. The AAII bulls leaped up to 50%, no problem. And now the majority is right. The market is soaring. Everyone is jumping in. I am used to waiting for serious corrections, until people get really negative on the market and don't want much to do with it, then I switch 100% back long. Can't do that anymore, it appears. Maybe it will actually up 200 pts a day and everyone will be on board and no one will be nervous. Who knows? Thanks for the feedback Wayne, but more than that, thanks for saying something I've been needing to discuss for a while but was a little bit hesitant to simply because it could come across like whining. Wayne's right - we're in a bizarre market situation right now, particularly in terms of psychology. While the market suffered a correction in the first half of October, it wasn't the kind of fear-inspiring plunge we needed to go through. Oh, it was a capitulation of sorts, and a 9.8% selloff is nothing to sneeze at. If you really thought the early October pullback was the kind of capitulation that cleans all the froth off and truly hits the market's proverbial "reset" button, guess again. We haven't paid that toll in years. For perspective, prior to last month's dip the last big selloff we saw was the 7.7% lull in late 2012. The last time we saw a plunge of any real consequence was in August of 2011, when the S&P 500 fell about 22% from high to low over the span of three weeks. So what? The big "so what" is, there's still a major capitulation coming. It will be marked by a true surge in fear. In other words, there's going to be a time when the poll on CNBC isn't telling us three-fourths of investors believe the market is going to rebound a week later despite the implosion unfurling at the time the poll is taken. We're going to have to take a hit that really spooks traders, and apparently it's going to have to be more than a 9.8% pullback to do it. If you're wondering why I'm expecting such a drop sooner or later (and probably sooner than later), the answer is, that's just the way the market works. No, it hasn't worked that way since 2012. That's when stocks began their slow but consistent ascent, with the Fed willing to halt any pullback before it ever got started. The Fed's safety net isn't entirely there any longer, however, so the odds of a more severe pullback just edged higher. At the same time - and I know this is a premise the bulls just don't want to hear - we can't ignore the valuation problem any longer. As of right now, the S&P 500 is priced at a trailing P/E of 17.6 and a forward-looking P/E of 15.6. Historically speaking, it doesn't leave much room for more upside. But I digress... back to Wayne's note/point. He's right. Investors have been freakishly persistent and oddly unwavering in their bullishness lately. That's why the market has sidestepped any major problems for months. I am 100% certain the market will eventually get back into its old ways though, and reflect the wild swings between periods of fear and periods of greed. That's the way things have been for most for most of the decades the organized market has been around. It's just human nature. I suppose that's the long way of saying to you, be careful not to assume the way things are now is the way things are going to be in perpetuity. There will come a time again when it makes sense to sell when optimism is oddly high, and when it makes sense to buy when pessimism is rampant. And, I still say that time may not be too far away. OK, getting off my soapbox now. Back on the Fence It's too soon to say the rally has come to a close; only a decidedly lower low will confirm that. Monday's action wasn't an encouraging sign, though. There was a serious lack of follow-through on a day when we desperately needed some follow-through if the rally was to be maintained. How so? A new week and a new month means a new mindset for traders, and the transition from October to November so far suggests the market isn't in a particularly bullish mood. The chart of the S&P 500 tells the tale. It was almost a perfect break-even for the day, and the day's bar itself was a short doji bar. Volume was light too. Where'd all the bulls go? The real killer, however, is that stocks just tiptoed into new-high levels above 2019, and rather than inspire a wave of buying, the rally just flamed out. This is a tricky scenario. The S&P 500 has every right to slide down to the 1968 area where the 50-day and 100-day moving average lines are converging without snapping the bigger uptrend. Should the S&P 500 break below 1968 though, that could be the beginning of more significant trouble. Even then though, there are several minor floors that could stop the bleeding should it develop. The lowest of those floors is around 1841 right now. We'll see. Bottom line? Let's interpret today's uneventful day as indecision, which more often than not is what you see at a turning point for stocks. The question is, how much of a turn is likely? For the time being we'll only assume a pullback to 1968 is in the cards, which is practically nothing. On the flipside, should the bulls get back on the horse on Tuesday, even then there's a ceiling around 2045 poised to cap the rally. That level may also be a point where the S&P 500's P/E levels reach unsustainable values, so it would be a logical rollover level. By the way, we may have a new trading idea for you on Tuesday morning. If you're looking to add something new to your portfolio, keep your eyes peeled for the newsletter tomorrow morning before the market opens. I'm about 99% sure we're going to be telling you about a new stock, but there's just a little more digging we want to do first.