The Bulls Drop Their Balls

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Earlier this week, I wrote a despairing post called Annihilation Nearly Complete. In it, I essentially said the bears were 99.9999% finished off, and that there was almost no hope left. (Oddly – – perhaps even schizophrenically – – I also did a post for PLUS users suggesting EWZ, EEM, and RSX as good short ideas, which turned out to be three great trades almost to the millisecond I posted it).

Putting up such an “all hope is lost” post is a true rarity for me. Indeed, it reminds me of October 2007. I actually managed to scrape up this fragment from the Internet archive which shows what I was writing back then; sounds familiar, doesn’t it?

The notion that “there’s nothing holding these indices back” was what I felt then, and it’s what I felt a few days ago. I’m not doing some of victory dance here, just because we got a drink of cool water in this Sahara Desert of bearish death, but – – – – just sayin’.

Here we have the S&P 100, which had a bullish breakout……..and then totally failed. Wednesday and Thursday, the market was basically marking time, but Friday, the entire breakout was laid waste.

Same situation with the S&P 500.

I am particularly excited about financials (as my PLUS subscribers now, since I did a specific post on that sector earlier today). Here is the broker/dealer index, which is tantalizing close to a fantastic breakdown.

The Dow Jones Composite never made it to this price gap (green tint). I will note, however, that its own bullish breakout remains intact, as prices never penetrated the horizontal blue line.

The Dow Industrials, however, did lose its breakout. We are about 1500 points away from its record high, and that green trendline now represents support, which is hundreds of points lower.

I am aggressively short now, but I realize that bears have tasted little but bitter disappointment for the past nine years. Every ray of hope (like Friday) is extinguished. The charts are weakening, however, and I can at least say with relief that the absolutely terrifying bullish prospects I saw on Tuesday have been neutered.