Unconvinced

By -

The most recent 8 trading hours have been very good to the bulls. With the market so completely battered and bashed, finding stocks that climbed double-digit-percentages is almost too easy. The tricky thing is that at any time over the past six weeks or so, the same kind of "fire sale" was happening with stocks, and it was impossible to say whether or not there were more drops to come.

Whether you're a bull or a bear, or somewhere in between, I think you would be hard-pressed to make a convincing argument that a well-defined, sustainable bottom has been established in equities. A single sharp spike down does not constitute a bottom, and I still think it's possible that the S&P might get as low as 960 before putting together a multiple-hundred-point mega-rally.

The key thing to watch, of course, is the Euro. On the daily chart, the Euro looks like it may indeed be ready to keep pushing higher for a while, but at the same time, for weeks on end, each of these surges higher has been nothing more than a pause in a stairway to hell. Just take a look at each of these green lines showing the turnaround point.

1005-finalEuro

About a week ago, the NQ had a really robust rally that got people very excited. When I saw this happening, I noticed that the NQ just so happened to be heading toward the underbelly of a broken trendline (circled), and I decided not only was it not time to buy, but it was actually time to get more aggressively short. I think the big push over the last couple of days may be another JSTFR opportunity.

1005-finalNQ

Here's the ES chart, not on a daily basis, but on an hourly bar basis. I think the next line in the sand is at about 1150. If you think of the past ten weeks as a range, we are closing in on the midpoint of that range. My belief is that, barring an awe-inspiring news event, the odds are better that we'll continue the downturn to the lower end of the range (and, possibly, finally break it) as opposed to continuing to claw our way higher. The easy money, so to speak, has already been made over the past couple of sessions.

1005-finalES

Just to be clear, I am not a Bible-thumping bear at all right now. Yes, I have short positions, but I'm only about 25% committed, and the 300 (literally) stock charts that would make great shorts are a long, long way from being safe at present levels. I therefore am on the fence, but tilted somewhat bearish.

Having said that, this post will wrap it up for me today. If a guest post comes along, I'll put it up later, but regardless, I'll see you in the morning.