Tuesday, April 5, 2016

Nearing a Top

It will take a while to completely top out, but Monday seems to have touched the high end of this thrust higher from the Feb. 11 bottom.  We reached 2071 on ES, which equates to 2079 on the SPX, which is close enough to the upper end of the December trading range.  Also, we got a double barrel blast of Yellen pumping which changes the news angle from declining earnings to the Fed will not raise rates and keep the easy money flowing despite the big rally.

I watch CNBC and other financial news channels and they are not bullish, but they don't want to be short and are afraid of "fighting the Fed".  That is the kind of talk I want to hear when I am looking to enter the short side.  As soon as I felt like pulling the trigger, we went straight down from Monday morning to now.  Definitely don't want to chase weakness with shorts here, but it is now game on for shorting strength.  There should be a few more short rallies over the next few weeks as we build a top.  SPX 2080-2100 should contain any upside attempts, and we should see support in the 2020-2040 area.  After this, I am looking for volatility to increase again as the global economic problems weigh down on the SPX.  It should be a perfect sell in May and go away signal.

I also believe bonds should pause and pullback here, as it has also gotten frothy due to Yellen.  Seems like most investors are afraid to short bonds too.  

I would be willing to buy a bit of a bigger dip in ES, if we can get to 2025-2030, or short if we get back to 2070.

No comments: