The End Is Nigh!

Well, I can feel the heat around the corner – the end is nigh:

It’s the last trading day of the month, so please remember that the funds tend to use up most of their buying that day. However, by around mid-day this also leaves the markets susceptible to a decline. So, knowing that leaves us in a precarious situation as we might have a difficult choice to make:

Remember how I repeatedly have pointed towards the Wednesday 913.84 high as our new ‘line in the sand’. This has not changed and this is what you should know about handling a breach of that point:

• If we breach 913.84 even by one tick the blue scenario is done for and we are most likely going to push above last week’s 924.60 high as well.
• However, that does not mean that we are going to reach 924.60 today.
• It also doesn’t mean that the market is going to breach 913.84 and never look back. It’s very much possible that we breach by a few ticks and then sell off hard – thus luring in a few more bears, which will then be nuked next week.

Of course the tape could push up and never look back and I would point towards the Zero Lite to make an assessment on when it’s a good time to dump your puts. I personally will not automatically drop the entire load if we tick my line in the sand. Unless we see some insane positive readings on the Lite there is a good chance that we’ll get a better chance to relieve ourselves from all the pain towards the end of the day.

On a personal note – although this week was a short one it has taken a lot out of me psychologically. Where I should see some green there’s a sizable flesh wound in my account right now – on top of it the tape of the last few days has been mentally taxing. As I said yesterday – going forward and until Primary {2} is conclusively over and done for my approach to playing the downside will be as follows:

• Play it small (as I have)
• Only go short at new price extremes in heavily overbought conditions.
• Wait for the initial drop and then take profits.
• Wait out whatever new lows might be painted, and perhaps go long (small amounts again).
• Rinse, lather, repeat.

The name of the game at this stage should be capital preservation in order to stick it to the bulltarts by the end of this summer. I for one will be there and trust me my evil rat minions – I won’t take numbers nor prisoners.

Hope this helps a little to make it through what will surely be yet another frustrating trading session. May the dark force be with you.

12:05pm EDT: We briefly dipped below this trend line – but quite frankly I would be surprised if we breached it today.

Sorry rats – I’m not trying to be negative or anything – but the complete lack of selling pressure has given me a bit of a bullish bias at this point. Any sell off we’ve seen has been more or less ‘condoned’ – the bulls have not been squeezed at all for practically three full months now – consolidations have been sideways as opposed to down.

On the other hand – as I always try to be my own psycho analyst – it’s worthwhile noting that my current sentiment is most likely shared by the few remaining staunchest of bears. Thus, it also means that a bear capitulation should be near – if not today (and we take a loss yet again) it should be sometime in June. And a capitulation by the bears is invariably followed by a significant drop. Yes, the market is a cruel mistress and she has a knack for hurting the maximum number of participants.

12:20pm EDT: I’m not sure what exactly is going on in the bond and credit market today but somehow Curly managed to drop the yield away from his panic line:

Guess I’ll have to mosey over to Zerohedge to get an idea what’s really going on. I have a feeling this was only a first test. BTW, you market correlation traders – let this be a warning to you. TNX down – market up!

And the Dollar = history. Boy, are we all screwed if this turns out to be a third wave down…