OH SO SO SO CLOOOOOOOOOOOOSE!
We are in the sell zone right here in the stock indexes. After Friday's monster rally that took out the recent highs, we are stalled so far today. Whether or not this will remain the case is unknown, but if we were for some reason to take out Friday's low today, that would be a greenlight special to get short. I doubt this will happen, it would take a huge move down today to get to that point, but you just never know. We have virtually everything I look at from seasonals, to oscillators, to accumulation indicators all telling us to look for a short entry now.
There is one other thing that I think might even be more important as an indication we are going to have a decline here, sentiment. I always watch CNBC at times when I think a market turn is imminent. I want to get a good gauge of the advisor sentiment just anecdotally. I have my precise measurements which already indicate an excess of bullishness. Watching CNBC this morning, virtually every single guest is bullish on stocks here. That should be the final piece to having everyone leaning one way. In the NBA they call it "pulling the chair" when a post player is leaning really heavily into the defender trying to get position, and the defender just steps away letting the offensive player fall forward to the floor. This is the equivalent of what we have here, a very heavy lean in one direction.
I have been nibbling on the short side in a few stocks with mixed results, about half wins and half losses last week. Unfortunately the way the markets move mostly overnight, you kind of have to front run stock trades a little otherwise you wind up chasing big gap opens. What I mean by that is that if you think a buy or sell is coming you have to position yourself ahead of time in anticipation of the stock indexes taking off overnight in your desired direction. This makes things a bit tricky when we get into a ramp up like this that moves into a sell zone. You have to be willing a take a few hits to be positioned correctly. It is likely that if we do change direction, it will happen overnight, and the next day will have a big down opening and alot of individual stocks will have gaps down. I don't like chasing gaps, so I need to be in prior to this happening.
At this point we do not yet have a sell signal, we are just setup for one if we get a breakdown. As a result I am trying to find a few things to get short now anticipating the overnight move which may or may not happen. This market is very very strong right now and this could go on upward negating all the things I have displayed on the chart. However, I am willing to risk a little to try and position myself here. I am also looking at re-entering the long side of treasuries today and have orders in there above the market. If stocks ever decline here, that will likely provide a boost to bond prices.