I have a feeling that the ‘early shorts’ are going to get burned in the next week or two. This market has shown itself to have a lot of very strong upward momentum and to turn minor corrections into pop up rallies.
I was studying once again the 1974 and 2009 massive automatic rallies and may have figured out more precisely when to go more heavily short. It is going to be very interesting to see if it plays out as I suspect. The analysis is actually quite simple and will provide details in the weeks ahead.
I will focus on this potential trade exclusively over the next few weeks. It just seems like the right thing to do now. It is still way to easy to get distracted with all the other market action right now. And it does not seem prudent for me to keep identifying typical stock buy setups because the risk in my opinion is transferring from ‘how high the market can go up’ to ‘how low can this market go’.
Anyway this post is just a preview of several posts over the next few weeks that will track what I believe to be a turning point in the market. I am going to try to keep it as simple as possible but I am going to use market action from the 1975 reaction rally and 1929 reaction rally to help me make some conclusions about where I think the present market is going.
The very difficult part is pin pointing the REAL turn in this market. It still looks like this market wants to go upwards in a straight line. We have not seen really rapid price destruction or ease of movement on the downside.
If I am correct in my analysis then there may be an ideal short opportunity coming in the next week or two. I will go over when I think the trade may activate and what the trade actually is in the week ahead!