Bearish now?

Surprised for the big two days selloff? If you took my words seriously, you should not. As I said yesterday before opening, the market was looking for an excuse to sell and it seems it has finally got the excuse whatever it may be.  Actually 2% selloff really is nothing for the market that has been up double digits within a few weeks but it may feels quite painful when people are so used to only up days without any meaningful down days, especially for those who are chasing highs in the euphoric mood. Friends are asking me if I'm bearish for stocks now. No, I'm not and actually I think this bull market has a good leg up in the months ahead. But that's a long term view. In the very near term, I do think the market has gone too much ahead of itself and is doing the best it can to fool the herd into believing that it will never go down big time. Whenever I see some folks telling people to just buy and buy almost anything, I know some painful selling is coming. That's why I sent out my warning early Monday morning. So now what?


Although we may see more painful days ahead in the next few weeks, the market hardly goes down straight line and you can bet the bulls will try every down day to step in, especially at the technical support level. After a 50 points decline in 2 days, S&P is right at about its 9 DMA, a short-term support. I think this is a very tempting support for bulls to come in for a "dead cat bounce".  The odds is much stronger for a solid rally in the next few days and S&P may likely go all the way up towards its recent high around 2870. If that happens, it will create a technical bearish double top with negative momentum. At that point, we may start to see an even more painful short-term crash to get the bulls some panic. With this consideration in mind, I have taken off my days-old shorting profits and actually more aggressively I opened some long positions betting that we will see some decent market rally at least for a few days. Let's see how this will play out.