Lack of Fear

They are not getting scared.  The bullishness has lasted for so long, the uptrend has gone for so long, that there is quite a bit of investor inertia.  Maybe you can call it denial.  But investors are not treating this selloff as something that can get really nasty, but are viewing it as a run of the mill pullback, with many viewing further downside as being limited.  You are not seeing the rush towards puts as you normally see when you get a nearly 5% pullback in less than 2 weeks. 

Let's compare the current selloff to the April correction.  In early April, right before 3 weeks of selling in the index, you had a somewhat complacent, but not exuberant market.  You didn't see rampant call buying or analysts raising their S&P 500 year end price targets left and right.  You didn't hear much positive regarding the Fed, as they were still viewed to be on the sidelines, with many investors still worried about inflation.   

Fast forward 3 months to early July.  Call buying in the Mag7 is prevalent, with lots of speculation in the big 2 options monsters, NVDA and TSLA.  Inflation is now viewed as being under control, with lower than forecast CPI readings for 3 straight months.  The market is now expecting and looking forward to rate cuts.  They are bullish on Trump's chances of being elected, and that was viewed as a good reason to buy small caps and non Mag7 names.  Breadth is expanding, which is applauded by the crowd.  It is about as exuberant a market as you will see.  Nearly 2021 exuberant levels. The ISEE index for the year shows the level of call buying steadily rising, reaching a peak in the first half of July.  Even after a 270 point selloff in SPX, the call buying persists, and you still are not getting more puts than calls opened, which is what happened for several days during the depths of the April selloff. 

The selloff in April started slowly and gained steam, as the steepest part of the selloff happened in the final week of selling, between April 15 to 19.  This July selloff has been much steeper, as the rise was much steeper, with markets reacting symmetrically. 

Yet, you would think that with such a steep selloff, you would get much more put buying and not so much call buying, but that's not what happened.  Surprisingly, you are still seeing much more call buying than put buying here.  

If you are a bull, this has to be quite concerning.  You have had much more selling than in April, yet traders have not done much put buying to protect their portfolios, unlike what they did in mid April.  Instead, they've been buying the dip this week and continued speculating in calls.  This has added to my conviction on the short side, as this is a lot of complacency in the face of bearish and volatile price action.  

The sentiment data supports this conclusion, as you are not seeing much of a drop in exposure.  The NAAIM fund manager exposure index as of Thursday is still quite long despite the selling, at levels that are higher than most of 2023.  

Seasonally, we are getting into negative fund flows.  August is the weakest fund flow month of the year.  Investors know history, and know that September and October are seasonally weak.  Plus you have many on vacation and looking to de-risk ahead of the fall. 

You saw more gyrations this week in investor positioning, as you got a violent unwind in the USDJPY, as the yen carry trade started to unwind.  The yen carry trade is so 2007, I thought it was given up for good after the nasty rallies in the yen on past risk off moments.  But with both positive carry and a steady uptrend, hedge funds have gotten greedy, and pushed their short yen exposure higher and higher.  The COT data shows how lopsided the speculators are short the yen.  The biggest short position in the past 10 years.  I expect the yen to gain strength, regardless of the moves in the 10 year yield, as these carry traders are not trading based on yield differentials, but have just been riding a one way gravy train.  With the Fed looking to cut rates starting in September, and the BOJ looking to hike rates at nearly the same time, you have a fundamental catalyst for a sharp yen appreciation.  A move towards the mid 140s is definitely in the cards within the next 3 months.  If that happens, that would cause even more panic selling among yen carry traders who have bought US and Japanese stocks with the proceeds of their yen borrowing. 

We are seeing a big gap up today after yesterday's volatile up and down trade.  I expect this gap up to fade in the first couple of hours of trade.   I have a full short position, which I will look to hold for a much bigger down move.  I expect this selloff to last longer than the 15 trading day selloff in April, as well as go down more than the 310 SPX points lost back then.  5250 is definitely in play in August.  I will not try to predict the path to that level, but predict that it gets there within the next 3 weeks.  I expect any bounces from here to be fleeting, and its not worth it to try to micro trade around the position.  All the signals and indicators are lining up for nearly a perfect storm on the sell side.  The setup is too bearish to play around with short term trades and potentially miss a big move. 

Sitting Tight

This game is 90% psychology.  You can read all the trading books, filled with cliches like "cut your losers" and "ride your winners", and it won't help you at all unless you can control your lizard brain.  We are all just animals that evolved to be good at survival and reproduction, nothing more, nothing less.  We didn't evolve over the millennia to be good at trading.  Being good at trading is not natural.  We evolved to hate losing, because that lowered our odds of reproduction and survival.  But that hatred of losing is what causes us to hold our losing trades longer than our winning trades.  Taking losses is admitting to being wrong and accepting defeat, things that didn't help with the goal of human survival and reproduction over the past 100,000 years. 

In the 1970s and 1980s, before the proliferation of technical analysis based trading and trend following systems, trend following was a simple, but very profitable trading strategy.  Trends would last a long time because so many traders were reluctant to take losses when losing and were quick to take profits when winning.  Trend following doesn't work so well anymore because there are so many trend following CTAs and hedge funds that follow systems that ride the momentum.  With so many more speculators trend following, it has created more false breakouts and trends that die out more quickly.  

Trend following still works, but it works better now in shorter time frames, rather than in longer time frames as in the past.  One of the things I've noticed in the SPX is how often you have trend days, but that most of the move is finished by lunch time, rather than by the close.  Systematic and HFT traders have become so quick to recognize and catch the trend that an up move that would normally be spread out over the whole trading day is instead compressed into the first 90 minutes.  The same goes for a down move.  This is valuable information for those who are looking to optimize their entries and exits during the day.  If you are going to short when the market is near the highs of the day, rather than shorting at 10:30 AM ET, its better to let the up trend go a bit more and short at 11:30 AM ET.  Or since you don't see too many intraday trend reversals, if it looks like a trend day by 10:30 AM, its probably best to just short in the final 30 minutes of the trading day.  

Overall, the market has gotten more efficient for shorter time frames, so its hard to generate alpha fading the intraday trends.  Its why I've gone from daytrading almost everyday to daytrading maybe once or twice a month.   In the HFT/hedge fund dominated short term trading world, retail traders are bring knives to a gun fight.  Trying to eek out gains through short term trading is exhausting and inefficient.  You are battling better capitalized, better informed traders on the other side.  Its a hard way to make an easy living.  

Back to the market.   The price action and news flow before Wednesday presented the setup.  One can either choose to wait for some price confirmation before entering shorts or to try to pick the highest price possible by selling strength.  There are pros and cons to both strategies.  I prefer trying to pick tops because it reduces the risk of getting whipsawed by short term movements.  But it increases the risk of being early on the short.  There are tradeoffs for both methods.  Its not easy trading the short side during a raging bull market.  But it can be done if you are picky with setups and only shorting when many things are lining up in your favor.  

As I mentioned last week, I thought the coming selloff would be just as steep as the rally was in the first half of July.  That's why I didn't want to wait for confirmation of weakness to short, because it would be hard to chase the weakness to put on a short position.  We've sold off 162 points in SPX over the past 3 trading days.  That's nearly 3% in 3 days.  It has taken the VIX from 13.19 to 16.52 during that time.  Its a fairly emphatic move coming off the high volatility, euphoric (for small caps) trading action that we saw early last week.  All you heard was how bullish it is for the market with Trump's election odds going higher.  People were talking about Trump trades and the strong breadth in the market with the Russell 2000 squeezing higher.  People forget how small and illiquid the Russell 2000 index is.  The market cap of the whole Russell 2000 index is less than the market cap of NVDA.  It can be jammed and moved easily with a few billion in ETF flows, which is what you saw over the past week.  

The weakness last week in the face of all the good news that came out is a good sign for shorts.  It points to a high probability that we reached bull saturation and upside exhaustion.  Add to that the seasonal patterns turning negative from post July opex into early October.  Plus the addition of election uncertainty, which keeps implied vol elevated, which increases the deltas of out of the money puts.  The market hates uncertainty, and that will help to keep a lid on any rallies from here till October.

Market participants have remained complacent and have been ignoring the selloff, hardly reducing their call buying, and there hasn't been as much put buying as one would expect with the SPX down 162 points in 3 days.  The ISEE call/put index has only slightly dipped, unlike the selloff in April, when it dropped big, and stayed down there for several days.  

The OCC put/call opening transactions data confirms the ISEE index readings.  The level of put buying barely increased, and the level of call buying barely decreased.  This is unlike what you saw during the April selloff, when the call buying decreased quickly, and the put buying increased quickly.  

The COT data now shows that asset managers are now the most net long SPX futures since early 2020, making them longer than they were at anytime during the bubbly 2021 market.  This is happening despite the steady decrease in open interest in SPX futures since 2020.  Micro E-mini SPX futures showed small speculators getting heavily long from July 9 to July 16.  

Anecdotally, the complacency is much greater now than in April.  One of the reasons I didn't get short in early April was because there wasn't that much euphoria or enthusiasm despite the strong uptrend.  In April, there was still a wall of worry about inflation and bond yields.  This time is much different.  People are bullish with the cooler CPI readings and the softer, but not too soft economic data, increasing the calls for a soft landing with the market now expecting, and very likely to get the first rate cut in September.  Early last week, there was lots of  bullishness and enthusiasm for this market, just from listening to the experts on CNBC and Bloomberg.  

News has come out that Biden has dropped out and endorsed Kamala Harris.  Politics is overrated, as both Democrats and Republicans have budget busting fiscal policies, so there isn't as much difference there as the pundits make it out to be.  Harris is a very weak and unpopular candidate.  First, all else equal, women politicians are less popular than male politicians.  Same goes for black politicians vs white politicians.  Obama was an exception, not the rule.  Second, Harris has already shown her weakness in the 2020 Democratic primary, being less popular than Biden, Sanders, Warren, and even Buttigieg.  

With this decision by Biden and the Democrats to pick Harris, it has handed Trump the win in November.  If the Democrats picked a moderate like a Joe Manchin as the candidate, it would be an almost automatic victory vs Trump.  Even RFK Jr. would be an almost automatic victory vs Trump if he was the Democrat nominee.  There would be many anti-Trump Republicans that would vote for a Manchin or RFK Jr. over Trump.  Almost none would vote for Harris over Trump.  Not to mention independent voters who would overwhelmingly prefer a Manchin/RFK Jr. vs a Trump.  But that will never happen.  Despite my view that Harris is almost a lock to lose vs. Trump, the betting markets won't feel that way, and that's what the financial markets will be pricing off of.  No amount of donor money coming into Harris will help her.  Luckily for the Democrats, her political career will end with this election.  The uncertainty of the election will linger, as many will overrate the chances of Kamala Harris vs Trump.  And there is a Democrat convention coming up in mid August, which I'm sure many fast money traders will be reluctant to be long into.

Initial price target for this pullback was SPX 5450-5470, but it may have been too conservative.  Given how traders have reacted to the 3 day selloff, its added to my conviction that we're going to get a significant selloff.  I now think that my final price target of 5360-5380 was too high, and that 5250 is now a reasonable price target for early to mid August.  I will be more patient with my short covers and more willing to re-short on any bounces for the remainder of July. 

Seismic Waves

Last week definitely shook up the system.  On Thursday and Friday, it appears that all the podshops decided to suddenly unwind their long NDX, short RUT trade.  With last week's Russell 2000 outperformance, you have a bunch of market "experts" who are suddenly bulled up because small cap stocks have outperformed large caps for the past 2 trading days.  CNBC was about as bullish as I've heard from them in recent memory, as they were touting the suddenly strong breadth in the market.  Seeing the strong outperformance of heavily shorted stocks last week, it looks more like a de-grossing of hedge fund positions than a new trend of high demand for small caps.  

You will often see these violent moves up and down at inflection points, where eager buying is met with eager selling.  This is not only happening at the index level, but at the spread level between indexes, as uncle points get reached and stop losses get hit.  These are classic signs of an imminent trend reversal.  You can feel the tension as the FOMO fast money gets hot and heavy, being met with supply from corporate insiders and longer term players gladly selling into these  high price levels. 

We're now near the end of a positive seasonal tailwind that lasts until July opex which is this Friday.  Considering the low put/call ratios and the rampant call option speculation over the past few weeks, I expect a big hangover as you get close to this monthly opex.  The ISEE index showing the call/put ratio of opening transactions reveals the stretched nature of the options activity.  The ISEE index 20 day MA is now the highest in its history, higher than even the go-go speculative days of 2021.  

I am seeing similarly high levels of opening transactions in calls vs puts in the OCC data that comes out weekly.  Options speculators are heavily betting on more upside, aggressively buying call options in the most liquid, high beta names.  Here is the call activity in IWM on Friday, the highest daily call volume ever for this ETF.  The net deltas and overall premiums paid for IWM call options were extreme. 

The overbought and overextended charts in SPX is a powder keg, waiting to trigger at the slightest hint of weakness.  The markets often trade in symmetry, so when prices go up rapidly, they are apt to fall rapidly.  Its been quite a steep uptrend over the past several days, and big picture, for most of 2024.  A couple of markets this reminds me of are July 1998 and January 2018.  Sharp blowoff tops that reversed even more quickly than they went up.

SPX July 1998

SPX January 2018

 

Over the weekend, after studying the Commitment of Traders data in more detail, it was an eye opener to see how long the asset managers have gotten in SPX futures, with the net long as a percent of open interest much higher than even the highest levels in 2021.  And those asset manager net long levels in 2021 were much higher than previous highs seen in early 2018.  Most of the increase in asset manager net long exposure has come from a huge decrease in the number of short positions.  SPY and QQQ short interest also keep going lower and lower.  The Street is very lightly hedged for downside at the present time.  I didn't think it was possible so quickly after the everything bubble in 2021, but in many ways, this current AI bubble is more frothy and dangerous for long term stock investors.  For sure, the positioning in SPX futures and SPY/QQQ ETFs is definitely more ominous than in 2021. 

COT SPX Asset Manager Short Position

SPY/QQQ Short Interest

A confluence of indicators are lining up to present a high risk/reward opportunity on the short side for SPX and NDX.  Technical, seasonal, and positional indicators are flashing amber lights here.  I am hearing many traders and investors who view July as a slam dunk up month, pointing to seasonality, and many of them are planning to sell at the end of the month.  I would not be surprised to see a sudden rush for the exits over the next 2 weeks as the uptrend tops out and post opex forces come into effect after a huge call buying spree over the past several weeks.  

Add to the mix the suddenly bullish news flow (Trump assassination attempt bumping up his election odds) and you have the ingredients for a good news topping process (cooler CPI, more Fed rate cuts priced in, Trump odds of winning going up, stronger breadth, etc.).  This it's "so bright, you have to wear shades" kind of news flow over the past week with the volatile price action catches my attention.  Based on pure instinct, I want to short more.  I plan on adding more SPX shorts early this week to get to a max short position.  I have not seen such a good risk/reward opportunity on the short side in SPX since late 2021. 

Giffen Goods

The higher the prices, the more demand there is for stocks.  Stocks have turned into Giffen goods.  In particular, the Mag 7 and the other momentum favorites like LLY and COST.  They are like luxury items.   The buyers don't care about valuations.  They just care about making money, and believe that the current uptrend will continue into the future.  That is momentum investing.  The passive investors just put there money into index ETFs, target date funds, etc. and let it ride. 

This momentum game can go on for a long time but not forever.  Eventually, even luxury items like Mag 7 stocks get too expensive, and marginal buying has less effect on the stock price, and eventually when the trend breaks, the sellers come out of the woodwork.  That is what happened at the January 2018 top, February 2020 top, the January 2022 top, and the next top which I would guess happens sometime between now and year end.  Its hard to time tops, but you can get a general idea of when both valuations and positioning are extreme, and those are signals that usually result in a top within a few months. 

Dealers have been building up bigger and bigger short positions in SPX futures, amassing a larger short position than late 2021, and comparable to January 2018 and February 2020.  Those previous 3 cases were in the vicinity of significant tops that resulted in a big correction within weeks (Jan 2018, Feb 2020) to a few months (2nd half 2021).  

Large short positions for dealers means that they are hedging their books which are heavily short out of the money puts and long calls (both in and out of the money).  When institutional investors are heavily long the market, their demand for out of the money put protection increases, as well as the supply of out of the money calls, as covered calls is a popular strategy these days.  So dealers end up heavily long out of the money calls and short out of the money puts.  They hedge this by shorting futures.  

Also, you are seeing asset managers with very large net long positions in SPX futures, which is a quick and easy way for them to add net long exposure, without having to worry about picking the right stocks.  The COT data for SPX and Nasdaq futures are both showing asset managers holding large net long positions and dealers holding large net short positions.  The positioning is extreme, and sets up a ticking time bomb scenario for the SPX and NDX.  History shows that you get violent corrections off of these setups. 

As has been the case since mid May, the stock market has been going up on the strength of a small group of large cap tech stocks + a few large cap momentum stocks like LLY, COST, CMG, etc.  The majority of the stock market has not been participating in the run up from SPX 5300 to almost 5600 over the past 50 days.  This not only goes for the US stock market.  Foreign stocks markets have badly lagged the performance of the US, and are mostly trading below their early April highs.  While the SPX is up 6% from those early April highs.  The Russell 2000 trades horribly, as their fundamentals are fairly weak, and investors are not willing to push up the prices of so many value traps.  This reminds me a lot of the 1999 market when tech stocks were flying higher, but almost everything else was going sideways or down.  Only in the last gasp blow off top in spring of 2000 did you see small cap stocks catch up and squeeze higher, but that rally fizzled out immediately into a sharp correction.  The parallels between the internet bubble in the late 90s and 2000 are eerily similar to the AI bubble that we are witnessing now.  All the way down to the weak breadth in the market outside of the stocks in the bubble halo. 

Without even looking at the economic data, just by looking at the way the Russell 2000 is underperforming the broader market,  you can sense that the economy is weakening.  I don't need to see lagged, butchered, and badly manipulated BLS data to confirm what I'm seeing in the market.  Yet investors remain complacent because 1) they believe that the Fed will engineer a soft landing by cutting rates later this year 2) they are making money in their index funds and have been conditioned to buy and hold no matter what.  The 30% drop in early 2020 and the 9 month bear market in 2022 have taught investors that bear markets and sharp market drops will be brief, and that the SPX always comes back stronger, making new all time highs within either a few months or a couple of years!  

Not only do US investors believe this, foreign investors have been paying attention and seeing how much the SPX has outperformed their country's stock index since 2008, and are now believers in US stock market exceptionalism.  Foreign investors are like the dentists of the past.  They are the last to get the buy memo, and are often caught chasing strong markets right as they are about to top out.  

The ingredients for a long bear market are here.  Positioning can get more extreme, but not much more extreme.  You probably need one last bullish, euphoric move higher based on "good news", such as Trump getting elected, with investors front running potential tax cuts and whatever other fiscal stimulus that comes along with a Republican sweep of Congress and the White House.  Considering how unpopular Biden is, and how unhappy the population is with high inflation and a stagnating economy, its almost a lock at this point that Republicans sweep.  That could be the final euphoric top for this bull market before reality sets in and investors realize that even bigger budget deficits just mean more inflation and higher longer term rates, rather than a return to strong economic growth.  

Got short on Friday, which was too early, and I'm saving my short bullets for a bit higher of a move before adding.  I need to see either a extreme blowoff move higher to add or some confirmation that the upward momentum is petering out and sellers are starting to come back.  Its a hard way to make money, shorting such a strong uptrend.  But that's how some traders and investors are wired.  Perhaps a rally on the CPI number on Thursday could be the exquisite moment to add to shorts. 

Bond Brakes

The bond market is putting the brakes on the stock market.  It was smooth sailing with the weaker economic data for the past 2 months but now that weakness has been priced in.  You started to hear more optimism on bonds and less optimism on the economy.  But that has run its course.  The economic expectations have been lowered, meaning that it will be easier for data to beat expectations, creating negative catalysts for bonds.  That has made Treasuries vulnerable to profit taking for any reason, even for something as far off as a higher probability of Trump getting elected.  

The knee jerk reaction from last week's debate was that Trump is more likely to win in November, meaning that you are more likely to get the Trump tax cuts extended, as well as having even more tax cuts on top of that.  That would blow out the budget deficit even more, and stimulate the economy creating more inflation.  Add to that the potential tariffs, as well as a tighter labor market coming from less immigration, and you have an inflationary mix that bond investors are revolting against.  

While I agree those policies are inflationary, I don't agree that Trump will get much done. He doesn't seem like a guy who is all that interested in policies, or passing a bunch of bills.  It was really the Democrats working with that closet Democrat Mnuchin, which resulted in that giant Covid money spew through the PPP program as well as assorted other handouts.  He's just a guy who enjoys being in the role of President, and the power that it entails, and using that power to enrich his cronies/family/himself in the process.  He seems obsessed with the stock market, so I don't think he'll try to fight the bond market because that is in essence fighting the stock market by trying to introduce super inflationary policies.  Overall, he probably doesn't get much done, and its basically the status quo, which is a stagflationary economy that is weakening slowly but unlikely to go into a deep recession due to bloated  fiscal policy.

What we saw the last few days isn't quite the return of the bond vigilantes, but with so much supply coming down the pike with the huge fiscal deficits, the bond rallies don't seem to be able to last for more than 2 months or so.  10 year yields have gone from 4.7% to 4.2% from late April to late June, so you've had your 2 month rally.  All those hard fought gains from bond investors over the past 2 months, gaining 50 bps, half of those gains have been lost over the past 4 trading days.  Hard come, easy go.  That is the definition of a weak market.  

You had some who were reluctant to be short Treasuries and Bunds due to the well telegraphed weak PCE number on Friday and the French parliamentary elections on Sunday.  Once that turned out to be a nothingburger, the risk off bid for Treasuries immediately disappeared.  Treasuries are not the risk off asset that they used to be.  The bids are fleeting, and you have to be extremely quick to take profits on the risk off rallies, because they just don't last for long.  Its the opposite of what you had from 2008 to 2020.  Those Treasury rallies lasted and lasted, and lingered near the highs, giving bond holders lots of time to sell the highs.  No longer.  The nature of the market has changed, with stock/bond correlations positive, making Treasuries a poor hedge for long equity exposure.  Instead of hedging risk, Treasuries have added risk during stock market selloffs since 2021.  

This has long term implications for financial assets and portfolios.  Investors will have to take less risk on the equity side and the fixed income side due to these correlations.  Long term, I find it hard to imagine a world where you have multi trillion dollar deficits during an economic expansion while maintaining low bond yields, high equity prices, and a strong dollar.  If the Fed wants to keep asset prices high, it will have to keep yields artificially low by either having negative real interest rates on the short end, or by restarting QE and pushing long term yields artificially lower.  The dollar will be the release valve in this situation, and will weaken substantially, which will help to contribute to higher inflation through more expensive imports and more bank lending which increases the money supply.  

Once you blow out the fiscal deficit to high single digits % of GDP, the free lunches go away.  Fiscal stimulus results in limited to no real growth, with most if not all of the nominal growth coming from inflation.  When you have inflationary policies and are unwilling to control the deficit, the population eventually picks up on the game, and act accordingly.  Sellers raise prices more quickly, and in bigger chunks.  Buyers will begin to hoard or try to get rid of paper dollars as quickly as possible if these inflationary policies continue.  Dollars will eventually become hot potatoes, like Argentine pesos are now.  We are not yet in the hoarding/immediately convert paper to hard money stage, which is Argentina type stuff, but its not too far away with this deficit trajectory.  The politicians are of course asleep at the wheel, continuing to pander and do whatever it takes to get re-elected, which is to give out goodies/cut taxes.  The exorbitant privilege of having the reserve currency let's the US get away with these policies for longer than any other country in the world, but foreigners will eventually revolt by selling dollars.  

Will voters start caring about the budget deficit and demand more fiscal discipline?  Only if they feel pain from the high budget deficits.  You need to see sustained, high inflation, double digit inflation year after year, and higher bond yields resulting in higher mortgage, credit card, and auto loan rates.  You saw a preview of that in 2021 and 2022, but it still hasn't gotten through to the thick heads of the American public, who still want their tax cuts, student loan cancellations, Social Security and Medicare benefits, and whatever other stimmies the politicians throw at them.  No one wants to experience short term pain anymore, so they will have to accept higher inflation as a result.  And it still seems many out there can't seem to put 2 and 2 together, and still blame supply chains for the higher inflation, instead of all the money printing that happened. 

Back to the current markets.  I am sensing weakness in NVDA vs the rest of the tech sector, as it seems the AI bubble got a bit ahead of itself in June.  You are still seeing Russell weakness vs the SPX and NDX.  Its still the same crap market underneath the shiny veneer of a low volatility, safe looking broader market.  That hasn't changed.  What has changed over the past few days is the bond market uptrend coming to a violent end, taking the SPX and Russell 2000 down with it.  That makes me even more bearish than I was previously, but am waiting for any short term rally to put on shorts.  Perhaps July 4th holiday bullishness will ignited a little rally to sell into.  An SPX rally towards 5500 to 5520 would be a gift to short.  Hoping for that rally within the next few days, perhaps on weaker nonfarm payrolls or a cooler CPI next week.  This market looks very vulnerable here.  Its just a matter of getting a good short entry.