SPX 2200 to 2600

Rough range estimate for the next month for SPX 2200-2650.  That means the middle of the range is 2425.  Right now, as I am writing, the SPX future are trading 2525.  It above the middle of the range.  As a rough rule, don't do anything in the middle, and sell 2550-2650, and buy 2200-2300 for the next 30 days.  It is not common to see a huge rally like we did yesterday, and then straight gap down 100 SPX points.  That is a new normal.  Buying rallies at the close are being punished the next morning like I nothing I have ever seen in my lifetime in trading. 

These are vicious bearish markets, and there is no positive catalyst now, with the fiscal pork stimulus behind us, and another one won't be arriving for at least another couple of months.  The only real positive I see is the dollar weaker this week, which is a sign that the rush for cash is mostly over.  Now its just a burnt down stock market with bottom pickers looking over the rubble for "bargains".  One month after a generational top in the stock market doesn't usually generate a "bargain". 

The huge bear market rallies will shake the convictions of the bears, and will excite the bulls, but its the crack cocaine of trading.  Sure the high is great, but it doesn't last.  This bear market rally didn't even last 3 days, before gapping down 100 SPX points!  That's almost 4%!  Before the cash market even opens.  Wild. 

This week has sucked in a lot of traders into the bullish side, calling bottom, and trying to play for a rally.  They are the ones that are puking it out early today, and its a warning for the next month:  don't chase strength, because it will come back down in a hurry.

The most bullish thing I see now is bonds rallying huge and not selling off even during the equity market rally the past 3 days.  But that bullish factor pales in comparison to the economic realities that most investors are still too complacent about.  A government stimulus program doesn't replace the economy.  The hopes are too high for all this stimulus, as if its a magic elixir that will paper over most of the economy's problems.  Don't buy it.  The damage is a lot deeper and long lasting than most believe.  It will play out all throughout the year, and that will present a lot of opportunities on the short side, and a few on the long side.  After the 3 day rally, its bear time coming up.