A few clicks north of where we are today, the bears are itching to unload a whiff of grapeshot at the advancing bulls. There’s been some short covering that’s lured the bulls into what some consider a classic bull trap. It will be a battle for the history books and I think it will begin to unfurl next week.

I’m starting to see a lot of short opportunities light up my computer screen. But I’m also hearing a voice behind me say, “Don’t fire until you see the whites of their eyes, laddies.” So I’m keeping my powder dry for the time being. But I can smell the winds of war drawing nigh.

I don’t know what the outcome of this clash will be, but until the evidence proves otherwise, we are in a bear market, and this is the rally, the fight, the bears have been licking their chops for. If the media propaganda sides with the bulls, which is always the case, this will make this battle even more titanic as it draws in more and more players.

Frankly I think this clash will swing back and forth with the bulls having the upper hand one day followed by the bears having the upper hand the next. It will become a war of attrition with no quick breakouts for the bulls or bears. And it’s not inconceivable the bears will push the bulls back to a retest of the recent lows. But pushing lower than that will be hard as economic data slowly begins to paint a more favorable bullish case.

As in love and in war, there is only one thing about the outcome that is certain. It will surprise.

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