[Note: I have started writing this before the futures had opened. Now that it's traded down 2% to 850 the dynamics might have changed. However I will present this viewpoint anyway]Don't end up getting into a short squeeze by being overly aggressive getting short. This is neither a bullish or bearish call but more of a warning to shorts. But first and foremost,we must yield to the market. We can come up with ideas and scenarios but ultimately we are at the mercy of the market.
This viewpoint obviously goes against the "technical grain". The flu news could prove to be the catalyst for the necessary leg down, but at the same time it could led to a snap back rally. The market is 'tarded.
You can read around and find enough negative divergences in charts while the indexes are rising. This is luring more and more bears back into the game while Goldman Sach's program trading runs over them and financials being propped up until they can raise capital. This in turn fuels more garbage buying and short covering and late to the party buyers who ate the green shoots and drank the kool-aid (soon to be the bag holders).
All eyes are on that 875 level and there will be plenty of stops just above. Thurgy has a sneaking suspicion we could short-squeeze all the way to 912+. Why? Everything else shows overbought, low put/call, falling VIX, negative divergences and indicators registering 2007 bull market highs. Then on the other hand you have earnings, the Fed prop, quant deleveraging and bulltards. Those pretty much negates the use of technicals at the moment. For now watch the 850,843,835 levels for support. I see the same technicals, and I too am waiting for the leg down. However, I'm not getting in front of the bus, but I will ride in it whichever way it's going. I do plan on putting on the +XLE/-XRT trade regardless. I am also long Gold right here and will buy dips.
Thurgy could see us having back-to-back turnaround-Tuesdays. We gap down tomorrow to 850 and trade down to 843'ish. This will lure in a lot of shorts but I think turnaround Tuesday will set the stage for that push to 900+, lasting for one week. This should complete the wave 1, in what I believe to be a larger 1-2-3 correction. The following Tuesday we'll start into the downward 2, that possibly could run through the end of May, ending somewhere near 800. Trading here will be extremely choppy. From here we should get the final push higher towards 980 and complete wave 4 sometime late summer. Get your financial house in order. Prepare yourself mentally, physically and financially for some very tough times ahead.
Those who consider themselves "investors" will watch as the green shoots wither away as they are left holding the bag. The visions of seeing their Bank of America and Wells Fargo stock doubling or tripling suddenly turns into desperation. The home gamers "investing" in the financials will never realize the banks and the fast money traders have taken your money. Your consolation prize will be increased taxes to give to the banks.
