The bounce I was hoping for is clearly in full swing. We've had two back-to-back days of triple-digit kicks higher in the Dow and the best two-day lift for equities in three months. Par-TAY, bulls!
To my way of thinking, this is simply setting us up for another great shorting opportunity. I covered a lot of shorts yesterday, and a few today, reducing my portfolio's commitment to about 52% (with the other 48% in boring, safe cash). Depending on how high the /ES goes, I'm prepared to push my commitment to nearly 100%.
The question, of course, is how high the /ES will push. I think there are two macro levels; one of them is at about 1104. If the /ES is able to push past this in a meaningful way – and it's going to take a huge amount of buying to do so – 1125 seems to be the next line in the sand. I'm going to be watching more than the /ES, though – I'll also be keeping a close eye on FXI and EFA – to know when it's time to start getting aggressive again. Until then, I'm keeping half my powder dry.
