On May 7th, a day after the Fat Finger Crash, I did a post that stated the NASDAQ Composite would push higher to about 2450 and then – – possibly – – fall utterly to pieces. So far, that is precisely the kind of rise that has taken place, and I have been aggressively adding to my short positions. Below is the minute bar chart for the past several months:
As you can see, I've highlighted what, I assume, is on every technician's mind, and that is this: is the topping formation we've recently witnessed going to simply be a replay of the topping pattern we saw in January? That is, a tumble, followed by a rise…..followed by a relentless continuation of that rise into yet another high price?
I don't think so. The main reason is this: I tend to be a "bottoms-up" kind of technician. These days, I'm looking at over a thousand charts every single day, and I try to smoke out as many individual opportunities as I can. Currently, I'm seeing just about nothing I like on the long side. There are rare exceptions here and there – – symbols MF and, to a lesser degree, CROX, spring to mind – – but for every mildly interesting long chart there are literally about one-hundred drool-inducing short opportunities. So it doesn't seem to be a market set up for a widespread lift higher.
In addition, what happened after January was quite different than what we're seeing now. In January, we saw a relatively steady fall lower spanning a series of weeks, followed by a multi-month push higher. This time, we instead saw an almost unrestrained collapse followed by a vicious rally higher over a mere few days. That rally seems to have run out of steam, as today's action illustrated.
There is virtually no doubt in my mind that the next several years are going to be absolutely calamitous for the financial markets and, subsequently, the political system and social fabric. I've never doubted that. What I have had doubts about is the timing of such an unraveling. But the stars are starting to line up these days, particularly as the government is, step by step, taking a more activist role in re-examining the kidnapping of America by the investment banks during the past decade.
I spent many of my adult years with a fiercely pro-business, laissez-faire mindset. The cliche is that if you're young and conservative, you have no heart, but if you're old and liberal, you have no head. Well, I guess that description must have been made for me. I am glad to see the federal government, clumsy as it may be, finally taking to steps to examine the laughably criminal conspiracy between the "ratings' agencies (ha!) and the international bankers. I am highly confident that, if we're seeing this kind of activism while the market is still sky-high, we're going to see an almost unrecognizable political configuration thousands of Dow points from now.
In the shorter-term, I remain entirely short, with approximately a 115% commitment of my portfolio to short positions. I actually had another 58 positions I wanted to enter before today's close (and you've never seen anyone work a spreadsheet so fast…..) but I simply ran out of time. Once the retail figures come out Friday morning, I'll see how many of those positions I'd still like to execute.
The dance we've been doing near the 1170 line on the /ES has been nerve-wracking, but I found today's late-day plunge to be heartening. A meaningful down-day on Friday would begin to place control of the market even more firmly in bearish hands.
