Pushing Into Overhead Supply

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I entered into Tuesday morning not only 100% short, but with all my cash and even some margin funds committed to those positions. Ever since then, due to my belief that we were heading for a minor relief bounce, I backed way off, and now I'm about 60% committed.

I had hoped that GDX would provide me a great hedge for the bounce, but it didn't. Yes, it went up, but its performance was really quite flaccid. At this point, I have no longs, because the one long I felt had short-term potential, GDX, went limp. I'm satisfied being totally short but "light" in terms of my commitment.

As I look at the intraday charts, I see the same story – – a market which is fighting its way back into a huge blob over overhead supply. Here we have the DIA, whose trendlines are particularly clean.


Next is the IWM, which is sporting a wonderful H&S pattern and has, for the entire month, been tracing out a clean set of lower highs.


The commodity ETF, shown below, also has made a very straightforward series of lower highs, as well as being under an important horizontal price level.


Finally, and perhaps most importantly, it only took a couple of days for all the fear to get vacuumed out of the market once again. Even if we do get more strength Thursday, I've got other good shorts I'd like to enter at higher prices. I don't mind the strength at this time (although obviously I hope it abates before too long).