I woke up this morning and saw that the market was amazingly up strong while the Nasdaqs and small cap high risk indices were all lagging big, along with the structure of the rally from the past couple days being very choppy and having overlapping waves barely making any real progress. It was a gift from the market gods this morning. I re-entered my short 1/2 short positions with the S&P around 773. And again, after the early morning the market trickled down all day, still proving that this market is not ready to bottom and that the larger trend is still down. Once a new low in the S&P at 741 is broken, the market is at serious risk for a huge bottom and rally that will rip your face off you're not careful. So very cautious trading here is warranted. I'm using call options to protect myself from a strong rally, especially if it starts in overnight trading when I'm unable to act.
As far as I'm concerned, two things need to happen before I will seriously consider getting heavily long the stock market:
1) The Nasdaqs need to break their 2008 lows
2) Some type of "wash out" decline should occur, i.e. a Dow down 400+ day followed by a huge rally into positive territory on strong breadth.
Until then, I'm still cautiously bearish the stock market.
I'm also currently short gold as well, with a stop at a new high on the year above $1,004.
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