Are all the bears dead now?
What a short squeeze that was on Thursday and Friday! If that didn't clean out most of the bears, I don't know what will! In fact, the guys over a Mr. TopStep stated... "Today is the largest gap up on any rollover in history."
So what does that mean for next week? I see about an 69% chance of a gap down on Monday, and another down day on Tuesday to follow. If Monday gaps up, it should provide the remaining bears the best spot to go short at. That 1100 area has been hit 4 times in the last couple of weeks, and should still hold the market back on another hit.
The only way I see the market going through that level and holding it, is to consolidate there for several days, and then gap up above on the next day that has some great news to support it. Trying to go up in a rising wedge pattern, and break the resistance, (like what we have now), is extremely difficult.
The odds are very low of sustaining a gap up, while in a rising wedge pattern. There won't be any shorts left to squeeze on a gap up, and the market will likely reverse back down hard. Falling wedges breakout to the upside, and rising wedges breakout to the downside about 69% of the time, according to Thomas Bulkowski's pattern site.
Besides the rising wedge pattern, we also have a perfect looking "MA Pattern", which is a very bearish pattern, with high odds of playing out to the downside.
Let's not forget that we still haven't put in a positive divergence on this chart found on Cobra's blog. Cobra also posts the Institutional buying and selling chart, and the Fed's Liquidity chart too. Also the Mutual Fund money flow chart. Cobra is a very good chartists... much better then I am, and he's still bearish too.
As you can see from those chart, the big boys aren't buying into this rally... they are selling. The Fed's aren't putting money into the market... they are withdrawing it. The mutual funds aren't getting a huge inflow of new cash either, as you can clearly see by the chart, it's as the lowest level in many years.
Did Friday look to you like a lot of buying was going on by the big boys? It didn't too me. How about Thursdays' ramp job? Did that look like the big boys buying, or just short covering?
How about this article showing that JP Morgan just sold the largest conduit deal in the CMBS market in nearly two years, for $716.3 Million. It's a package that's backed by 36 fixed-rate commercial mortgage loans secured by 96 properties. Hmmm, sounds a lot like selling Real Estate Investment Trusts (REIT's) in 2007... just before they crashed down. I wonder if they took out insurance on them too, just like Goldman Sachs did with AIG? They probably are short commercial real estate right too.
Look at this chart, that shows what the next ticking bomb is... and when it's likely to explode. (Commercial real estate isn't shown in the chart, but it's due to hit about mid-2010 to 2011... I couldn't find that chart, sorry).
Then on Friday, Rip Van Trader caught a large trade of 3.5 Million shares being bought on TZA, the ultra short bear etf for the Russell Index. Either someone is very rich, and doesn't mind losing a bunch of money, or they have some inside information that the market is going down over the next few weeks, not up.
Now, as for fake prints, I'll direct you to this print, showing 2 prints at 1055 ES... which will also fill the gap up on Thursday. Notice how all the previous fake prints were hit within 1-2 days. Will this one be different? I think not. In fact, I think we will fill that gap on Monday or early Tuesday.
Here's another strange print showing 100.72 on the SPY (about 1000 SPX), and it has not been hit in a long time... meaning that it will likely be tagged very soon. I think by Tuesday, but that's just based on my thoughts that it's going to take 2 days (Monday and Tuesday) to get the 60 minute charts extremely oversold.
Then a rally the rest of the week, to close out this triple witching option expiration week at a level that benefits the market makers the most. Where... I don't know?
P.S. If you want to see a bullish case too... go read all the other blogs on the Internet, as many are turning bullish now. I don't disagree with them, as they all have valid reasons for supporting their stance. There are many charts that are turning back up now, especially the daily and weekly. But, I'll let you decide which case makes the most sense too you.
Good luck to all the bulls and bears this week.
P.S.S. Really interest read about Astrology during the next two weeks (click here to read it).