This week, when we refocus on the S&P 500, Nikkei 224 and other indices keep in mind that there are dangers in price action as bearish views continue to perform well. Our confidence is high but reason and logic (as well as December memories) are key. We will be tempted to cover shorts and establish a long. Be careful as price action could be shockingly fast and those looking for a “snap-back” rally or reversal could step into another sell-off driven by capitulation. This could be painful so wait several days longer than usual.
Those of you who know me well, know that I love watching a 2 to 3 week sell-off, and focus on the index, sectors and names, excess divergence points, short-sell ratios and the usual 7 point check-list. But now avoid “establish the long over 3 trading days” or any talk of trying to pick the low tick. It is too dangerous.
I will be sending emails….