October is traditionally the time of year when the stock market takes a bath. It doesn't happen every year, but for some reason the last quarter of the year tends to start off weak.

The last week saw serious support and resistance build a nice little channel formation. A breakout could come either way but there does seem to be some building momentum on the downside.

Whichever way it breaks I would be cautious. A move lower will have to retest resistance before a sustained drop off is likely. If you look at the last three "legs" that got us here they all look the same (more or less). We need to see a test and break of support and new lower resistance before we can be really confident selling.

Likewise a move higher is suspect because of the divergences between price and momentum. And while "indicators" don't tell the whole story (and they certainly don't predict) the declining momentum makes you wonder "what's holding prices up?"

It'll be an interesting week.

Erich