Sisyphus Redux

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Can bears drop like flies? It surely seems like they can; bloggers that have been wild-eyed bears since last Spring have fully thrown in the towel. Even some authors on this very blog have joined the bull camp. The only stalwarts seem to be our friends in Gainesville, who are back into Wave-Two-Is-In-Its-Final-Throes mode.

As for me, as you know, I've entered a few long positions – – most of which prospered today – – and I will leave it to them to escort me out of my bear cave if they are able to do so. But the preponderance of my positions remain on the short side, and although July has been a cruel mistress to me, I was at least heartened that my fully-loaded portfolio was down only about 0.35% on a day when the Russell was up 2.24%. This kind of severe "underperformance" I can live with, because it suggests that my short positions can still hold their own reasonably well in the face of another triple-digit rise on the Dow.

July has been, almost without interruption, a month for the bulls. You can see how the market has embraced fearlessness with gusto by one look at the emaciated VIX, which has dropped 55% in just a couple of months.

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The strength of the Euro, naturally, has played a huge part in July's equity strength. Wasn't the Euro and its continent supposed to be doomed? On June 6th it sure looked that way. Anyway, if we shy away from the high made on July 19th, equity bears will get a bit of breathing room. Otherwise, the "threat" of the EUR/USD moving up to about 1.35 remains.

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Looking at the September NQ, the price is getting dangerously close to breaking that descending trendline (I would note, with some chagrin, that the ES has already done so):

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For me, I am still watching and waiting for this countertrend to exhaust itself. If we break above June 21st's high, that is another nail in the bearish coffin. If we break above January's highs on the S&P, that's another nail – – and a big one – – which will leave index charts in an even worse muddle than they are now.

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