Wednesday, October 12, 2011

Markets setup for a fall…and possibly off a cliff

After covering shorts in the 590's for the Russell 2000 - the 1080's for the S&P500...we triggered short today and have very high quality fills near the highs...I am expecting this trade to be powerful. We sold the dollar for the dollar in the 80's and now are long again in the 77.20's...I expect that the dollar will regain those lost points much more violently than most would think and rush to new highs. So, additional to short triggers on the equity market...we got triggers long on the dollar...and now will likely get triggers short on Oil, Silver and Gold tonight or tomorrow...all in all, its the same story and same channel. People who were long got stopped out and went short...only to get hammered and highly leveraged on this current now, many people are most likely flipped from short to long again and on all out leverage in order to try to overcome the losses on at least four failed momentum swing trades. THIS IS WHY I do not trade momentum or breakout just does not work over all. If you only trade at extremes you are much better off.

In any case, today we broke out over resistance on the S&P500, which for all intents and purposes looked like a clean breakout, took out stops and got people really convinced that they needed to be long. - the reality is that the breakout failed, as usual and we closed under resistance. While this rally has gone higher than I expected, it has tested and slightly overshot the resistance zone...and I believe that people are unprepared for what is about to befall them. I do not think people will get the chance to get in or to get out in a satisfactory way and that will cause quite a bit of volatility in our already leverage junkie markets.

The EURO has additionally, convinced participants - especially apparently Goldman Sachs clients, that it will be saved and is going to be I have said before, in today's markets the goal needs to be to short the shorts. When shorts capitulate - SHORT! That appears to be what we have now.
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