Current Long Positions (stop-losses in parentheses): None

Current Short Positions (stop-losses in parentheses): ESV (42.84), MR (33.39), SPY (109.07), WTFC (37.71), SLAB (44.80), CERN (83.56)

BIAS: 70% Short

Economic Reports Due Out (Times are EST): ICSC-Goldman Store Sales (7:45am), International Trade (8:30am), Redbook (8:55am)

My Observations and What to Expect:

  • Portugal downgraded – first significant piece of Euro-news in quite some time. Muted reaction by the market. Could come into play though later today or in the days to come.
  • Chinese property issues – muted market response
  • Alcoa has strong earnings report – market is up very strong heading into the open – creates a large gap to be filled at some point. 
  • Bears will need a bonecrushing session to reverse the bullish sentiment. Today is a perfect opportunity for the bears to fade the opening gap up, and to push this market lower.
  • Today’s pre-market strength makes sense when considering the earnings run-up of late. Crowd now sees the rally from the past week, the positive Alcoa (AA) earnings report out last night, and now wants to make sure that they are in at the ground level for what is perceived in their minds as an unbelievable market rally just on the horizon that they are afraid of missing. In reality it makes more sense for the “smart-money “to use “dumb-money” optimism to sell this rally. 
  • If we do though rally through earnings season, the bearish argument for this market is off-the-table for the time-being. Therefore the bears cannot afford an earnings season rally.
  • Market is quickly becoming overbought.
  • Volume yesterday showed, once again, no enthusiasm by the bulls, despite having rallied.

Actions I Will Be Taking:

  • Will look to commit an additional 20% of my capital to the short side on market strength.
  • If the market continues to show strength today, I will load up on a large QQQQ position to mitigate further risk.
  • May use market strength to add another index fund.
  • Will consider scalping a few intraday trades to curb any possible trading losses from my swing-trades.