Carter Worth: Stock Market Will Not Break Down in October

Stocks staged a comeback Monday after a week of wicked volatility.

Considering last week Carter Worth told us the up-trend in place since March 2009 may be broken, what does he have to say now?

He has some good news and some bad news.

First the bad news - Worth tells us that patterns in the charts now suggest the highs for the year are in. He believes the sharp downdraft over last 10 days – from 1350 to 1100 – will generate a lot of selling as the market climbs.

”We’re so damaged that as the market approaches the upper end of its range and investors are made whole, there will likely be significant profit taking,” he explains. "That makes the prospects of getting above 1350 very low."

Now the good news. ”The plunge to 1100 was so violent and aggressive that I think it was capitulation,” he says. And patterns suggest that the lows are also in for the year.

That’s significant because there's chatter in the market suggesting that the S&P wants to retest the lows of 1100 in October with bears convinced that support won’t hold.

However, Worth counters chart patterns suggest the lows are not going to be re-tested let alone break. "1100 is the line and I think we hold it."

If Worth is right, investors find themselves caught in the middle, with a market range bound for at least the next couple months.

And trader Guy Adami, who also closely watches technicals, thinks the next move within the range will be lower.

He says the key level to watch is 1246. "Support could become resistance," he says. "Let's see. If the market pushes higher over the next several days, I think the rally should be sold."

* You can see more of Carter Worth's analysis in the video here.




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Trader disclosure: On Aug 15, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders Terranova owns (XOM); Terranova owns (CVI); Terranova owns (CAT); Terranova owns (OXY); Terranova owns (AAPL); Terranova owns (DAR); Terranova owns (FCX); Terranova owns (CACI); Terranova owns (ARUN); Terranova owns (ORCL); Terranova owns (EMC); Terranova owns (NCR); Terranova owns (VMW); Terranova owns (IBM); Terranova owns (AMZN); Terranova owns (LULU); Terranova owns (LTD); Terranova owns (WFM); Terranova owns (WFC); Terranova owns (JPM); Terranova owns (AXP); Terranova owns (FXA); Terranova owns (VRTS); Terranova owns (LQD); Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Najarian owns (AAPL); Najarian owns (C); Najarian owns (BX); Najarian owns (MS); Najarian owns (MSFT); Najarian owns (PFE); Najarian owns (TCK) ; Najarian owns (ECA); Najarian owns (MS); Najarian owns (DIS); Najarian owns (IDCC) calls; Najarian owns (GLD) calls; Najarian owns (GDX) calls; Najarian owns (SLV) calls; Najarian owns (SGI) calls; Najarian owns (CMC) calls; Najarian owns (RSX) calls; Najarian owns (DIS) calls; Najarian owns (UNP) calls; Seymour owns (AAPL); Seymour owns (BAC)

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