9:28 AM - Never think you can outsmart the devil, but you do know his tricks. Here is the deal. I am bear until the end of year. And sadly I somewhat expect it to be painful at times. I will have to do a damn good job at timing, because the market wants to rally. Let's look at what we know:

1. Classic TA pretty much unanimously declared a bottom. Strong Volume shaping a hammer reversal on an important trendline. At the time of the reversal the hourly and daily Oscillators were all coiled for an up move, and the weekly was bottoming out. Everything lined up nicely.

2. Right now, the news is mostly positive, with a lot of unknowns: Fiscal Cliff talks look promising. Big wigs such as Buffet and Greenspan are confident. Greece got it's bailout money, Israel and Hamas are singing Kumbaya together in the streets, Black Friday went well (above 12% over last year, I believe). 

And that is what will do this market in. Everyone is already on one side of the boat. Options are too heavy on calls, sentiment is way too bullish, VIX is way too low, VIX:VXV is way too high. You see this behavior at the end of a run, not the beginning of one. We never hit 20 or 25 on VIX in this last 10% price correction. Fear was prevalent, but panic never set in, and that means greed is festering. Panic offsets greed. To define greed for the sake of what we use it for, it is disorderly optimism, in a similar format that panic is disorderly fear.

So, here is the dilemma. We want to capitalize on a downward movement. The market wants a bull movement. We are contrarian to the market, so we have to be really careful. First, we need to predict a time for the market to capitulate. I have this at 12/7. This means we may bull rage until then. It also will not likely go on the exact day that I have it at. That's life and that's the market, so that means we have to be prepared both a little before and a little afterwards. If the market does not capitulate, we will miss the big run-up, and we have to be okay with that. People will call us foolish, and if capitulation does not come, we will look foolish. I am okay with that too. Trading is not about ego, it is about making money and preserving money when you cannot make money.

Today's expectations:


Take a look at the chart below. We are not giving up reading charts at all, but we may have to extract every reliable bearish move possible if we want to stay in the market. There is a lot of congestion between 141 and 142. I would expect us to range between 140-142 for the bulk of this week. Daily volume was tapering on up days and spiked slightly on yesterday's down day. Now, SPY is an ETF, not a traditional stock, so volume does not directly influence price in the same way, but it does signify demand and investor's sentiment guidance. 

I suspect if we touch 142 without touching 139.67 first, we will pull back to that number then before any move higher. If the market is really as feral and as ravenous as I think they are becoming, we will shoot to 144 within a few short days after that. I am not ruling out short bull plays, but they would just be for reversals with quick entries and exits. It would be far worse, to accurately predict a capitulation, but have it start a week early and get caught in it, just to make a few extra pennies. So, we will see at the time, and what the market is behaving like. We will also consult VIX:VXV, CPCE and VIX at those points.

So I took a bear position around the 140.90 marker and I am quite happy holding it for now. 

Lastly, something to think about for today: just because the market behaves poorly, does not mean you should.



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