Bears have another chance….

When we broke 920 to the upside back on the first day of June I said I was standing aside on the short side.

We traded all the way up to 956 but now we have been bouncing around the 200-day moving average that was broken at the start of the month and we stand at 920 again.
My reasons for standing aside were that the dollar was in a freefall which was rocketing commodities and stocks higher.

The dollar has recently found support and bounced near 78 and is now holding well above 80. The S&P is holding support at its 200 day moving average but a break of that level would leave it very vulnerable.

The MACD, McClellan summation index, Put/Call ratio and stocks above the 50-day moving average have finally clearly rolled over to the downside…

Although they were all VERY extended for quite some time seeing them finally roll over is a good sign for the bears. Really instead of selling my longs when I saw all of these indicators overextended I should have waited until I saw them roll over. Overextended just kept getting MORE OVEREXTENDED until the last 2 weeks when they finally broke.

Friday is quad-witching day which has been positive 5 out of the last 7 times so we could have an “options pinning” up day on Friday but the bears have another real chance to take the market lower here. I have shorted some weaker names that have already rolled over… (WYNN, AMZN, PALM, COF, etc) Also if the market is going to roll over the emerging markets are going to take a big hit with the MASSIVE run they have had. EEV (ultrashort emerging markets) even though it is a ultrashort is probably a good play at $22. Even the old SRS and SKF might have some life but remember with ultrashorts you are playing with fire.

Really if you are playing it safe the best thing to do here is just to scale out of your longs and see what happens in cash at these levels. Of course I have been saying that since the mid/high 800’s so what do I know… :)