Today’s snap-back rally probably has many bulls feeling pretty good about being long, but I’m definitely not in that camp. The volume was considerably lower and almost every chart I look at is wrecked from a technical point of view. Ultimately I don’t know if we bounce here or head lower, but I am seeing many signs of weakness that weren’t there during previous corrections and this leads me to believe that this time could be different.
Even though I’m quite bearish now, I don’t think it’s wise to load the boat on bearish positions just yet. There is still a good chance we drift higher for a day or two before rolling over. as I stated before the markets were quite oversold. One strategy would be to buy partial short positions late in the day tomorrow, or Monday, and complete your position when/if the markets do start selling off. That way if the markets do rebound and go onto new highs you’re somewhat protected from leveraging yourself too heavy on the short side.
Below the Put/Call ratio is actually at record bullish levels, indicating the crowd is accumulating call options and the contrarian in me finds this extremely suspicious.
