Tuesday, August 5, 2008

August 5, 2008; Rally Too Deep

The rally today was far stronger and deeper than I expected, obviously. The Dow broke its key level and the S&P should do so early tomorrow. The rally is weak as far as momentum goes, but breadth was solid. Again, this is just a news rally on the Fed announcement which is typcial. There's virtually no new fundamental or technical reason that called for this rally. It's just temporary. But how temporary? That's the big question now. And right now, I don't know. Tomorrow should tell us a lot, and we should see the possibilities of how far this rally might take us. My guess now is that it will go quite far. I think the S&P has at least another 35 points to go before it reverses. The Dow could test the 12,100 area. But this is all just a guess right now. The fact that this rally was all fluff and hoopla over the useless Fed makes me very skeptical about throwing out any wave count at all. My short positions in ETFs remain intact, and my futures position is intact with a stop just above 11,600 but I fully expect that to get stopped out in the middle of the night tonight, or tomorrow morning. I will simply wait for a signal of a top again, and re-enter short in the futures as soon as I can. But my ETFs that short all three major indices will remain in place, and ready to take a lot of pain the rest of the week.

But keep in mind, the larger trend is down, and we're in a very large wave (3), so any big suprises to my analysis will be to the downside. Tomorrow can just as easily be a 500 point down day. I'm holding short.

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