Quick Update

On Monday, I closed out all my ultrashorts for small profits (leaving individual shorts in place) once it looked like the market was done going down for the time being. According to some of the cycle analysis that I use, July 6/7 was a key turning point and when it looked as if the S&P 882 was going to hold (and we broke resistance at 888), I sold off all of my ultrashorts during the day (between S&P 890-900 approx).

However, beginning on Tuesday and especially Wednesday, I have begun to rebuild those ultrashorts once again, to the point where I am roughly 50% back. There is a possibility (again according to cycle analysis and key anniversary dates) that the top is unfolding this week or to roughly July 22nd. Many key turning points (both tops & bottoms) have transpired around mid July. Recent examples of key tops in mid-July were in 1990 & 2007.

Another possibility is that we continue to rally until the first week of August. Either way, I believe the sell-off will commence within the next few weeks, and that August and September are going to be very, very ugly.

I mentioned in my recent missive:

I now think that the real move lower started on June 11th when we hit S&P 956. I am not sure if we are going straight down from here or if we are going to rally a little bit first here and then go lower in August...

I may change my analysis tomorrow, so do your own homework...

Obviously, we did rally and it appears that the line in the sand for the bulls is around 870-875. It appears that the Goldman & Intel earnings have triggered an option expiration bull stampede. I don't believe this changes anything regarding the 10 factors I outlined in the previous post.

My plan is to continue to average down in these ultrashorts over the next few days and possibly, even go bigger now that this last gasp rally appears to be in place. The action of this past week seems to be impetuous (Canadian dollar rallying from around 85 to 90 in 3 sessions is a case in point).

Disclosure: positions in USD, Yen, CAD, ultrashorts in oil & various equity indexes, selected equities, long gold.