While we were right about the bears losing their aggression heading into Tuesday's market session, we do not believe that they are closing up shop; meaning the rally that we saw today will be used as an opportunity to reload their short positions. And like we said before, we are going to use it to do likewise ourselves. Going forward, we are targeting a couple of leveraged ETFs and small to mid-cap stocks to short as we believe weakness in the market will start springing up again.

The Fed meets tomorrow which could add some volatility to the markets, but unless they cut by 75 or 100 basis points (the latter of which is extremely unlikely), we doubt that they will drastically affect the outcome of the markets. Wall Street has already priced in a 50 basis point cut and we don't foresee them cutting more than that. Also, the Fed's power to affect the markets in a positive way over the past few months has been almost non-existent in terms of rate cuts and it shouldn't be any different tomorrow. 

Here's the Nasdsaq and S&P charts...

This past week has been quite interesting as to a new phenomenom occurring more than 50% of the time, and that is the late day sell-offs that occur with only 5-10 minutes remaining in the market session. Now, over the past year, we have seen quite a bit of selling occurring in the last 30 minutes, but it was very eratic at best. But what I'm talking about here, is decisive price action - either straight up or straight down - while the sell-off direction has been its primary tendency.

A couple of reasons for this, first, it could be the majority of margin calls are taking place at the end of the day, forcing investors to liquidate existing positions (I have NO IDEA as to why anyone would want to be in margin at all in this market, unless you have tomorrow's newspaper sitting in front of you). Second, those who invest through traditional brokerage houses and those with 401(k)'s could be liquidating their retirement funds in mass, which generally occur at the end of market sessions.  The last possibility is highly unlikely but could be true, that in a stable or slightly positive market session, shorts are expecting a major sell-off the following day so they are shorting with market orders right before the close (again highly unlikely in my opinion). 

This market has become increasingly concerning for us to short in. Stock are getting hammered day by day, and the ability to find stocks worth shorting is not the problem, you can pretty much short anything and you will make money (unless they are ETF's like SKF & QID of course.). The real problem lies with trying to find shares to borrow from the broker as they are becoming depleted of their reserves.

For instance, we use Think or Swim to as our brokerage, and they have started running into trouble finding shares of giants like MSFT, AAPL, GOOG, among others. Now, I'm sure that there are brokerages that have these shares available to short, but it nonetheless, raises the red flag. Hits on Shareplanner are coming from people typing in such phrases as "how to short" and "day trading short picks". This makes me thing that too much of the crowd are starting to short stocks, which makes me very nervous.