OK, we are getting the snapback but I don't think correction is done yet

Bears were celebrating again last night, once again acting as if market crashed back to the lows. Practically every time they do this Mr. Market slaps them across the face the next day. I've said this before and I'll say it again....don't count on sustainable downside (i.e. a new bear market down leg) until these burned bears show some humility. I noticed FAZ once again regained it’s number 1 spot on the top ticker list last night on stocktwits....it didn't take long to rekindle that abusive love affair did it?

Even if the market has in fact peaked it could very well be the case that a trading range top building process similar to December 2001 - mid March 2002 will occur. In this case, the market was coming off a 3 month rally and then during this period the market was building a major top but there was a ton of bear whipsawing which by the time it was over, had shaken out and demoralized most bears before that brutal April-July down leg ensued.

SPX from Sept 17/2001 - March 31 2002



Prior to this latest sell-off I had pointed out signs of bear demoralization. I said bears were getting weeded out, FAZ was no longer the top ticker on stocktwits and those bears that remained were at the point of maximum frustration. But you can see that all it took was for the market to drop 5% to give these guys some hope and trigger euphoria again and so it doesn't appear as if bears are demoralized enough IMO....but it's getting there. Like with torture, everyone has a breaking point.


Despite my bear bashing there are good reasons to expect further downside in the days ahead as I had pointed out last week in my IT top warning post. But I can't stress this enough....you must be very careful in picking your spots. Chasing breakouts and breakdowns will likely lead to pain...you must buy the dip or sell the rip. More than ever, this market is being driven by emotions and trigger happy traders. I believe the proliferations of these 2X and 3x leveraged ETFs are contributing to it. It's getting to the point where the tail wags the dog with these things and I've already heard rumblings about regulators possibly banning these things. I sure hope they don't.

If today's rally holds at around these levels. I'm considering playing a 1 day bearish option spec trade such as SRS calls. I had success last month doing this and market conditions were similar.