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Being on the wrong side of the market is painful. I can only compare the feeling to being in desperate need of a root canal, but having no access to pain medication or a dentist. So you sit with the pain.
On Thursday the market gave me every reason to get short term bearish. We saw reversals in Apple and the Nasdaq, which from my perch meant something. The transportation index, which is a key element in the continued success of a near term bullish view, started rolling over. Names like GOOG and AMZN were breaking uptrend lines and leadership was appearing to fade.
Thursday we saw the euro collapse and violate support while rallying the dollar. This sent stocks lower. Yesterday the euro ripped higher sending the dollar lower, resulting in a big rally in stocks. These moves are all based on the ebb and flow of news out of Greece and the ECB. Don’t let anyone tell you Greece doesn’t matter because it still does. It’s still the tail that wags the dog.
The euro is still ridiculously shorted and no one wants to be short over the weekend in case Greece gets resolved over the weekend. So we are seeing short covering in the euro. This happened yesterday and will probably continue to happen today. This should send the dollar lower yet again and lift stock prices higher today.
Today is options expiration, so there will also be some aggressive positioning I am sure. The markets are closed on Monday.
I don’t know if the market will sell good news on Greece Tuesday (if there is good news), that sometimes happens, or just rally further. The Nasdaq and the S&P are both at levels where they “should” correct. That doesn’t mean they will.
So far I’m wrong on my shorts. I don’t mind being wrong for a day or two. At the end of the day I think this market could melt up this year. It has given me no real reason to think otherwise, but I still believe its frothy and in need of a pullback.
If anyone has any questions, feel free to email me. I will be monitoring the existing etf’s today and promise to keep you posted.
Have a great day.