Topping Process Starting

We have entered the topping phase in earnest.  One of the unusual things I've noticed this week is that unlike previous down days, the down days this week have all occurred on very low volume.  Today's volume is also below average, despite almost a 1% down day.  This is actually bearish, not bullish.  When you have a lack of buyers on a dip like this, it tells you that there aren't many willing buyers at these levels.  The market needs to go lower to attract value buyers.

With all the optimism last week, with Tepper screaming buy, and Draghi's QE threats and LTROs, you had most of the ingredients for a good news top.  This week's action confirms that we are indeed topping out here.  How do I play it?  Since the rally has been so relentless, there will be choppiness here, near the top, with rallies off of short term oversold levels.  In fact, I am looking to buy the dip tomorrow to play a short term bounce into early next week.

But bigger picture, you don't want to be a long term buyer of S&P here.  But I also want to be patient looking for things to short.  China is at the top of my list.  Today, we had a furious bond rally off a bullish 30 year auction.  Remember, usually you get a selloff ahead of the 10 and 30 yr auctions, and then a rally when the auctions are over.  There are still too many shorts in the bond space.  It amazes me that fast money traders are still stubbornly clinging on the short side in bonds, it has been even worse than shorting S&P this year.