I was surprised to learn that the Taliban only has 25,000 fighters. Story here.

Mutual funds are still bleeding from the eyeballs. In the latest week, outflows increased again for funds that invest in US stocks (“Domestic” in that table). I have been tracking this data since they began the weekly reports several months ago, and this is the worst outflow since the March bottom, though it is nowhere near the outflows at that time so far. Heavy outflows often signify a bottom as the public panics, but it’s hard to say what “heavy” is. Was the March plunge a once-in-a-lifetime event? Or is that the standard now?

The market made its first lunge downward last week on Wednesday afternoon. The talking heads on CNBC said it was a “mistake” – as if some trader at an i-bank pushed the red button on his trade-bot by accident. When the market bounced back on Wednesday, they claimed vindication. Not once did I hear the word “triangle” on CNBC.

Now these same traders have declared that they all got short on Monday. Imagine getting bearish after the McClellan Oscillator plunges below -200, and the VIX spring has already sprung. Ridiculous! The market may continue to fall, of course, but the odds are with the bulls for an oversold bounce.

The market pushed the lower line of George’s triangle downward so that it is now parallel with the top line. However, the market needs to rally very soon to hold onto this potential pattern. It still hasn’t hit the triangle target, and since this was such a large, powerful pattern, I would be shocked if the target wasn’t hit by the end of this week. The bulls would be lucky to get off with just a downtrend channel.

George’s triangle was a dramatic pattern. We probably won’t see another triangle of that magnitude for a while, but they are worth watching out for, right?

The IWM bounced at its October 6th gap on Monday. The bottom of that gap is at 59.09, and that is an important level for the market. Small caps and banks have been getting a beating, so if they can find support, the overall market has a better chance.

The futures held up well overnight, and the market is attempting to run back up to the top line of George’s triangle. If the move up is lackluster in terms of speed and volume, then that may be a sign that it will fail to break out once it hits the top line, assuming that it does get there.

When George first spotted this triangle on Friday, it was a neutral symmetrical triangle. But by the end of the day, it degraded, and is now looking more like a bearish descending triangle (click chart to enlarge):

The height of the triangle, the dotted linen between “A” and “B”, gives us the projection if the triangle breaks to the downside from this point. The blue line below the triangle is the same length as the dotted line, so “Target” is calculated as somewhere down in the 1050’s.

Ironically, that level is where another triangle formed on October 6th-7th.

Another wave up to the top line of the triangle might be a dream scenario for bears.

NDX futures are testing their rally high on Microsoft’s earnings “beat”. But there is no growth at Microsoft. Year-over-year, both revenue and earnings were down double-digits.