Looks like the bulls jumped back in today in the face of market weekness. It really was not a surprise at all and I told you last night that if you didn't take profits from Monday, you were a greedy pig.
You have got to take profits after days like Monday if you are a bear. You can't ride it out unless you are ok with loosing some of it back in anticipation of a further downward move. But when things like SRS, are up 20%, SKF up 17%, you got to take your profits and wait for a new entry point. Don't get greedy! We are still in a bear market rally so a big pull back is going to be met with resistance and a bounce.
I think todays action was healthy. It could be healthy for the bulls that it bounced back but it could also be a healthy correction for bears.
I think we broke a key trading range and we are headed for a correction. I know Waxie is going to the bullish side, but I am betting against him. I have done this 3 other times with him being right once and me being right twice.
I think we are on a trail to 760 which will take a couple of weeks to play out. More clarity will come out about the banks and once that is out, the market will start behaving based on fundamentals again, which are negative. The market is riding the financial wave right now but once the visibility on banks are clear, the focus will move back to unemployment, retail, RE.
The VIX was down slightly today and I think that is a sign of potential bearishness coming up. But it is not a clear signal at all. In fact, we have to consider the VIX as a bullish indicator right now until it can go above the 20 day MA and close there.
So, tomorrow I am re-entering short positions that I sold off on Monday. I am attacking DFS and AXP. Going to buy back the SRS I sold and be very happy about it. Any move up in SRS and I am going to sell covered calls on them for protection and generating some cash.
A somewhat bullish-ish play I am making is to short or buy puts on EEV (ultrashort emerging markets). It is primed to go down or stay level but with decay, should be a pretty good bet for May and July puts.
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I don't know what to think about this market. Everything rationally points to an economy that is still in the doldrums with unemployment numbers still terrible and yet the market ticks ever higher. Geithner gives his doubletalk and the DOW soars.
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