Ok, I just looked at every single chart and indicator I could get my hands on and I've come to the conclusion that the market is going to dip in the ST probably to about the 1000-1010 level on the SPX. As per the Rydex clowns as I now like to call them, the high levels in MM funds always suggests 1 of 2 things: a)upside breakout immanent or b)any downside drop would be limited. I orignally felt a) would be the outcome but I'm now thinking b) because of other trader money flow indicators along with weak market action from leading sectors such as tech, emerging markets and also the Dow transports. In addition, the 10 DMA of the equity put/call ratio is quite low and there was a spike in mutual fund inflows despite the fact that the market didn't go anywhere. When you see enthusiam like this with no justification from mom and pop 401K investor is smacks of Johnny Come Lately buyers comming in...and Mr. Market tends to love give these guys a baptism of fire. I know it's only 1 week of data, but still....
Let me also say that I'm not making this ST bearish call with the greatest of convictions. The rydex clowns along with the 49% bearish reading in AAII gives strong reason for doubt and what could end up happening is that the market makes some sort of a blow off move to the upside at around 1100 before FINALLY pulling back signficantly. But I'm going to stick with the ST bearish posture, so there....no cop out.
Next week is a big economic news week capped off with the big kahuna non-farm payrolls on Friday. The market is likely going to be very whippy so be very careful.
Short side candiates I'll be looking at will be POT, RIMM and EEM. Because my conviction level on the short side isn't high, I will not be playing the short side unless the set up is near perfect. I'll glady remain in trader pergatory i.e. do nothing.
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