Tricks or treats for equities?

Mid-week market update: Will investors get tricks or treats this Halloween?

Here is the good news. The sentiment backdrop was sufficiently washed-out for a reflex rally to occur. For some perspective, I refer readers to Helene Meisler's recent Real Money article:

Long time readers know I am not known for my sunny disposition when it comes to markets. I am a contrarian; when we're going up, I look for what can take us down and when we're going down I look for what can reverse us back up.

But it struck me when I took the mute off the television on Monday how really bearish everyone was. All of a sudden no one is interested in buying the dip. No one is even interesting in "picking." All of a sudden everyone is talking about at least a revisit of the February lows or more.

Remember when there were targets on the upside of 3,000 or 3,200? Now I see 2,300 or 2,200 coming out. We might get there but I find it fascinating that many of the new found bears all of a sudden want to buy the market lower.

SentimenTrader also observed that flows into inverse Rydex mutual funds have gone off the charts, and such readings have tilted heavily bullish historically.

Here is the bad news. Despite the two-day snapback rally, my models have flashed two long-term sell signals.

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