Chartology: Market Riddle

What do cowboys, cattle and Guy Adami have in common? They're all home on the range. "And I think the range right now is between 7800 and 9500 on the Dow,” Adami says.

Confused? Look at this chart of the Dow. It keeps bumping its head at the top: 9500 and bouncing off the lows at 7800. In other words it’s range bound.

So what's keeping it roped-in this range? It’s and old fashioned case of tug of war.

Bullish traders who think valuations are insanely low, and don't want to miss the bottom have sent stocks on a handful of triple-digit rallies. But then on the other side, beaten-down baby boomers are using every rally to desperately cash-out what's left of their dwindling retirement funds.

As a result $39 billion has gone out of market this month alone.

Is there any hope for stocks to break out of this range? Or should you consider Tuesday’s rally just another day on the range?

Jeff DeGraaf, ISI head of technical analysis tells us that Tuesday’s rally is far more credible than the past rally a couple weeks ago.

S&P 500

“This is the 6th best rally in the S&P since 1925,” he says. “If you look at volume and breadth it makes me more bullish than I’ve been in quite a while.”

With sentiment so bearish, “we have a condition that would set itself up for some type of mean reversion probably to 1100,” he says.

As a result, “the best market strategy right now is a call spread on the S&P selling the upside around 1100,” he concludes.

What the bottom line? Sell the rip!

To see DeGraaf’s entire analysis please watch the video.

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Trader disclosure: On Oct.28 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Macke Owns (WMT), (SDS), (UUP), (MCD); Seymour Owns (AAPL), (F), (MER), (TSO), (RIO); Seygem Asset Management Owns (EEM); Finerman Owns (GS); Finerman's Firm Owns (TSO), (VLO); Finerman's Firm Is Short (BBT), (IYR), (IJR), (MDY), (SPY), (IWM), (USO); GE Is The Parent Company Of CNBC