Tuesday, January 26, 2016

Choppy Moves

What you are seeing is a choppy move higher off the bottom that we set last Wednesday at ES 1804.  You have those who want to sell rallies to lower their equity exposure at decent prices along with short term traders looking to catch a move off the bottom into higher prices.  The big theme though is to sell the rally.  So you know these rallies are not going to last long.  That was evident yesterday as sellers swarmed at the first sign of weakness off the Wed/Thur/Friday thrust move and investors were unwilling to buy the close ahead of China.

Overnight, you had more crash like behavior in the Shanghai, but Europe acted like a champ, perhaps boosted by Draghi's dovish words, ramping up the weak futures.

Now we are right back towards the SPX 1900 area, where you have been getting selling.  You can feel the bulls getting friskier here, after that V bottom last week.  I am not so bullish here, but definitely am not going to try to short it just yet.  I want to see overextension on the rallies.  ES 1920-1935 is an overextension zone.  The most dangerous times to short are right after a flush V move higher, because the momentum and renewed bullishness usually lasts for several days.

Big picture, I am still bearish this market, but you have to play the chop correctly not to get cut to pieces here.  Buy ES 1860, sell ES 1900-1910.  Play that for the next few days.  With corporate buybacks set to comeback in February, you have to be careful shorting.  The corporations are going to be eager beavers looking to buy back their stocks which have been hammered this month.  Probably better and safer to buy the dips till early-mid February.  After that, it will be back to bear time.

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