Well, I've been watching the ES chip, chip, chip away all through Sunday evening and Monday morning, and it is a good, happy thing. It is 6:55 in the morning in Palo Alto as I am typing this, and a few minutes ago, I took a screen shot showing that the ES was at its last support level before breaking beneath an important trendline.
Well, I took a fresh look at it, and the ES had dropped another 6 points, and that trendline I mentioned was shattered. So the focus is no longer on support but instead on how far this thing could drop.
Let's take a look at what happened last time important support was violated.
I think the likelihood of the ES making its way to my target of 1050 this month just went much higher. The most likely market to lead the way there is our new friend the Euro. Again, by the time you are reading this, these charts could be incredibly stale, but here's what I'm looking at now:
This is a huge, huge month for news. Shalom's big announcement on September 21st might be what pivots the market to its last hurrah before the ferocious bear market I've been dreaming about kicks in. The monster event closest to us is the German high court's decision on Wednesday which could drop a nuclear bomb on the Euro. Then both Shalom and the POTUS are yacking it up on Thursday with their usual crap that won't make any difference to anyone.
Look, the market is doomed. The bulls are going to be completely mauled, and this market isn't going to bottom until February 5, 2013. We have to deal with the crap that the politicians are going to hurl our way in order to "save" the market, so my main goal is to not get badly hurt during those instances when the Washington wackos try to muck the natural cycle up (which they did in a horrendous way from September 2010 until July 2011). This bear market is natural and necessary. The politicians trying to get in its way are heretics against the forces of what is right and proper.
You can't stop what's coming.
The tricky thing is that profit opportunities are swift and usually hard to predict. I consider myself well-positioned right now, with about 100 shorts and 0 longs, although I wish my commitment level was 200% instead of 70% (naturally), but risk management is an important part of the equation as well. Who knows – by Tuesday morning the ES might be in the green, although I think it's about as likely as Oprah trimming down to an attractive waist size and keeping it there indefinitely.
As I type my last paragraph, the Euro seems to be steadfastly refusing to crack 1.4053, which is the oh-my-God level on my chart. There are a lot of fun posts from this weekend, so I'm sorry to jump in like this and stomp on them, but I wanted to share my thoughts on the latest drop. I personally think Tuesday is going to be terrific for the bears, but my don't-get-too-greedy level is 1050 on the ES.