How much is enough? Or, enough already.

Having been fat bears for sometime feeling the wounds of the bull’s horns is no fun.  It will of course be more fun if you observed our caution to put on long hedges and take some profits and scale out some.  Now the question is when will the bulls be satisfied.  Contrarians and traders everywhere are licking their chops and looking for the first opportunity to get short off this rally.  We too think the rally is a limited time move.  We think (not a thought, but an analysis) that the recent low will be revisited.  this is partly based on the thesis that the market intends to drive as many people crazy as possible, and a good rally here and then another dive would drive most investors screaming mad.  The present rally is 22.48% and 15 days.

So where is it likely to exhaust itself here?

Take a look at the downtrend line that ends at 8400.  This line is perfectly positioned to stop the rally.  It combines a horizontal line with the sloped line to form strong resistance.  Above that is the line ending at 8800.  This line also represents strong resistance.  We would be buying moving issues in here for hedging purposes with the intention of scalping them if the rally turns back.  And unlikely as it seems for longer term holds if those lines should be taken out.

Our crystal ball says that the next few days should be turbulent.

This rally is the absolutely to be expected upwave response to the 45 day downwave.  Painful, isn’t it?

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