After being beaten for months, shorts have truly capitulated as represented by NYSE short interest.   We've seen endless short covering rallies the past few months but those rallies are running out of fuel.  What happens when the market begins to roll over?  Longs are all invested with cash levels at record lows, while shorts have covered.  Who puts a bid in the market?

When this market corrects and it will happen someday,  there will literally be no one to squeeze.  The bulls will have to rally the market themselves and not the bears for a change.

I would like to get you thinking about financials into the weekend. All the big financials had unhealthy action today in addition to not closing at the highs as the major indexes did. It was not good. The BKX, WFC, C, JPM, BAC, AIG, GS…and a host of others all posted bearish chart patterns that look like they are going to resolve soon…additionally this pennant on BKX looks like a continuation pattern…

Additionally, the transports did not have an especially strong day either…

By the looks of things its about to get interesting…

  
 
for a more detailled view of this chart click here

 
for a more detailled view of this chart click here