Clear my Eyes

It's always interesting to wake up, see a huge gap on the charts and keep rubbing your eyes until you are convinced what you thought you saw is really there.

I said last night that I didn't think we'd see strength in the a.m., but this is a whole different ball of wax we are looking at. This is why I had an ambiguous tone last night to my charts and analysis here and at Trade Guild, not because I foresaw something like this, simply because in the short term, I had no visibility whatsoever. That can happen for a couple for reasons, one of them can include as I mentioned last night, the Byrd passing may have totally changed the game, I didn't think so, I'm inclined to not think so, but maybe it did. In that case, if that is what happened, then Wall street is deconstructing the position they took last week as fast as they put it together, thus we have short timeframes following them in the other direction and the longer ones are like a tail or a ship with momentum, it takes them longer to turn.

Another scenario.... we are back to the crazed volatility game in which we see a huge gap down and then a rally back up, this would be one of the bigger volatility moves we've seen and we've seen some big ones.

The final scenario is kind of the same as the first (although there really is no end to the scenarios), the market is not bluffing and this market is ready to move down. In this case, we do the same as we have been planning on doing since we established the core short positions which are on the list 6/3/2010. We are at 50% of portfolio in these positions, (if you have been around awhile, were bought long before 6/3 at much better pricing) but the idea has been to add the final 25% and leave 25% in cash, as the market moves below the $104.40 area on the SPY. So be ready for either scenario. If you are long any stocks from yesterday, you should also have core shorts in place as those are the priority, so you should be largely hedged and not be in need of desperate action, meaning I would not just sell on this gap opening. Try to wait and see if this is a shakeout, if it continues down, then you have to do what you feel comfortable with, but if it goes below our bear trigger then be quick about adding the rest of the shorts to your position.

If visibility returns, then we'll have a good idea of which way to play this, I would guess it wouldn't be until late morning before we see what the 2 min chart will do.

Stay tuned today. Checkout any of the limit shorts that have been on the list that have not triggered as well, and even longs if they do trigger (some may).

I'll update as soon as I see something definitive.

Aren't tops fun?