In My Beautiful Balloon

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On the first day of the year, on my flight out here, I was vividly reminded of something I had just read the day before from a certain market analysis firm that shall go unnamed: they declared that the market would lose "10,000 points in the next 3 1/2 years". Even I, Tim Knight, Mr. Short Everything, found the statement ludicrous, but given some of the eye-opening descriptions of Hedgehogs versus Foxes that I wrote about this morning, I was able to understand a bit more clearly what was going on. Wildly dramatic statements get a lot more attention than sober analysis.

If the Dow is going to lose 10,000 points over the next 3 1/2 years, I guess after today it's going to lose 10,300 points. I again say to those of you who embraced last Friday's frenetic selloff as a huge call-buying opportunity two things: (a) congratulations! (b) my mailing address for excess cash is available on this blog.

The last trading day of 2012 and the first trading day of 2013 absolutely crushed volatility:


There has been (yet more) damage to the bearish side of the ledger. Here are some reasons for equity bulls to cheer about where 2013 is heading; first, a continued breakout from a very well-formed diamond pattern on the AUD/JPY:


The clear violation of the topping pattern on the NASDAQ 100:


A breakout on the semiconductor index:


And the continued ascent of the Dow Transportation Index:


Not all hope is lost, fellow bears (Oh, there aren't any left? Hmmm; OK, I'm composing this post for myself, then). Many indexes are mushed right up against key resistance levels. Of course, this means any more strength will start breaking these patterns as well, but we have to take things one day at a time (After all, 10,300 Dow points is going to take some time, amiright?)




The Russell 2000 is likewise right at resistance.



There's no more terrifying time than right now to be shorting a market this strong. The bulls have everything in their favor: the Fed, Congress, the Goldman cabal……..everything. Bears don't have a friend in the world. But there is no way in hell I'm buying this market at these prices. On the contrary, I continue to hunt for bearish setups on a chart-by-chart basis, and this is the kind of explosive orgy of buying that (sometimes!) represents the very best times to sell into strength.