Covered Short

The bounce is just too strong.  If we were going to have another pullback, we needed to stay under SPX 2070 but the market just blasted all kinds of resistance levels.  The only way to explain it is that Brexit was an event that was on the calendar months ahead of time, so the investment community had time to prepare for the fallout, making the fallout in equities smaller than most expected.  And also the resolution to the upside much quicker than expected.

This game is about positioning, who needs to buy, who needs to sell.  The daytraders and HFTs provide the squiggles intraday but the big movements are driven by the institutions and their need to keep up with the S&P and not fall behind.  I took the loss on this badly timed short and will watch from the sidelines for the next trade.  Over the next few trading sessions it could go either way, and I don't have much conviction.  But I am leaning towards more of a rally in the coming days, up to the SPX 2100 level.  That should cause bonds to pullback towards 10 yr yields of 1.60% if the SPX does indeed retake 2100.  The chop continues, even with Brexit.