In the month of June our focus was working the long positions and keeping a wary eye on a turn in the market that would signal the need to step aside. That signal finally materialized last week. Our thesis has been updated to reflect this thought and as I suggested over the weekend with the latest Naked Trades article, the time has come to look to the short side of this market for entry.
On the short term basis, the DJIA has sold off rather seriously without so much as a stand at what was significant resistance less than two weeks prior. That tells us that all we had was hollow shouts for higher price points, not real buyers. The give up of 1198 SPX was telling on Friday. I really expected it to hold. Now it becomes intraday resistance with the 1210 area now significant daily resistance.
The high percentage play is to expect the market to at least stabilize or bounce from these levels. Momentum has a way of ruining the higher percentage plays so you shouldn't blindly bank on it. The even higher percentage play is to slowly build some short positions in the coming days as July looks to be a painfully hot month for the longs.
On the short term basis, the DJIA has sold off rather seriously without so much as a stand at what was significant resistance less than two weeks prior. That tells us that all we had was hollow shouts for higher price points, not real buyers. The give up of 1198 SPX was telling on Friday. I really expected it to hold. Now it becomes intraday resistance with the 1210 area now significant daily resistance.
The high percentage play is to expect the market to at least stabilize or bounce from these levels. Momentum has a way of ruining the higher percentage plays so you shouldn't blindly bank on it. The even higher percentage play is to slowly build some short positions in the coming days as July looks to be a painfully hot month for the longs.
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