Friday, May 27, 2016


This isn't just a BTFD market anymore.  It's also a STFR market.  A fader's paradise, if you have deep enough pockets to wait for the reversal to play out.

We got that rally that ALWAYS comes when you get spikes in the put/call ratios like you did last Thursday.  It just happened with more force than I expected.  But we've been consolidating downwards and digesting the massive gains from Feb-Apr, so the market was due for a rally that lasted more than a day.

The fundamentals are horrible.  The buybacks have been cut back.  The Fed has been chirping about a possible rate hike in June.  The stock market is like Alfred E. Neuman, what me worry?

It truly is astonishing how resilient this market is, and how deep the distrust in this market is.  Almost everyone calls this rally fake, because the earnings are telling a different story from the share prices.  No one ever said it would be easy to slay this S&P 500 monster.  It truly is the final boss, and despite repeated hits, it keeps coming back like a zombie moving forward.  But I believe the final boss is close to being slayed.

With heavy short covering as shown below (NYSE total short interest divided by total volume), you are getting rid of the short base which is what has been driving a lot of these short term rallies.

I am very close to jumping into the bear camp after this rally has got rid of most of the weak shorts, and provided better prices to start a short campaign.  Next week should be ideal to start shorting and riding the wave lower that is likely over the summer months.  Anything around 2100 is a premium selling zone which provides a great risk/reward setup, with perhaps 2% risk to 2140, and 15% profit potential back down to 1800.

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