Note - from June 24th 2009, this blog has migrated from Blogger to a self-hosted version. Click here to go straight there.
Thus far, the 'short any bounce' hypothesis has paid off for those agile enough to take profits at the 60-SPI-point level and re-enter on bounces back towards 4900. You will notice that the venom in the bounces is waning - which you should take to be a warning sign... luring dullards into unwise short positions.
That's not to say that the short side of the market is going to get hard for us... given that Rant-o-philes initiated their 2006 shorts within twenty SPI points of the all-time high (and have had at least two situations in which they could pocket gains and wait for another bounce to overbought to short again).
But it will be hard for anyone who shorts at the current oversold market status; the SPI in particular has worked up a nice daily oversold condition that should prove disastrous for those who have initiated shorts in the last stages of this first thrust down.
I am not saying to try the buy side - because frankly the global economic and geopolitical picture is starting to get ugly. There is now some wider reportage of the chicanery in the official US statistics (stuff that I have banged on about for three years), and the US dollar is looking very shaky despite having bounced 1.5 full points (basis the USDX) in the last few sessions. USDX just can't shake that 90 area (which I identified as resistance when I talked about the bounce of USD off 82-ish). When you consider how lacklustre the Euro has been recently, you will realise that the weakness is being driven by a growing unwillingness of foreigners to hold USD reserves. The upcoming Iranian euro-denominated oil bourse will exacerbate that trend - to the benefit of the Euro, primarily - very soon after its launch in late March).
Anyhow... there's not a lot more to say - guard your gains on the index shorts, and expect a short-term bounce relatively soon. Re-entries will now require a divergence - and I will be back online to give chapter-and-verse details of those very shortly (at which time the gory details will be distributed to subscribers first, of course).
