Cracking the Mirror

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Trading in the past dozen hours has been awfully peculiar. There was a tremendous war of words between the U.S.and China (which, in a normal market, would have sent the market crashing), and yet this morning equities totally recovered their overnight losses and soared into the green. Again.

As of this moment, things seem to be faltering a bit. The small caps have been very strong for a full week, but if this is as much as they make it, we’ll have a slightly “lower high” on our hands.

The reason this is an important level is because a breakout above the prior high would be a fairly big deal. There is quite a well-formed cup with handle pattern. Thus, if some cornball big news came out (in the spirit of GILD and MRNA) that gave markets a reason to go higher, a cross above the horizontal would supercharge the bulls. It hasn’t happened yet, though.

The NASDAQ, which has been the superstar for the bulls over the past two months, sealed up its own price gap yesterday and looked poised to make lifetime highs within days.

This, too, has pooped out for the moment. We had our breakout yesterday (green circle), which is at the level of the former price gap. But as I am typing this, we are plunging beneath the same level. So this may have been a failed bullish breakout.

Lastly, the ES has been threatening to complete the exact same cup with handle. The ES is better-formed than the small caps. Notice that the attempts to push through the line have been precisely the same, as opposed to the diminishment that the /RTY has been going through.

The risk to the bears (if there are any besides me that haven’t committed suicide) is still the same, however. A push through this level would give the bulls even more confidence, as if they lacked any in the first place.

As for me, the past two months have been, shall we say, humbling, and particularly after the last week, I am practically rocking back and forth in a corner holding my favorite teddy bear. Thus, I have avoided being aggressive.

As of this moment, I have 45 short positions, 3 long options (very long-dated puts) and a commitment of just under 100%. My trust of this market has been completely shattered, with MRNA being the straw that broke the camel’s back.

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