The Checklist

It seems like a good time to make a list of the short term positives and negatives. The positives are:
  • Rydex traders stayed stubbornly long through last Friday's decline. This week they have finally taken down their longs to low levels. While they have increased their shorts, they are nowhere close to extreme levels yet.
  • The market will be maximum oversold at the end of the day today. The oversold reading will be very good if we could manage an ugly day today. 
  • The 10 day moving average of the put call ratios are off their lows and are reaching the high end of readings we have seen since the March low.
  • Sentiment surveys have all shown large drops in bullishness although there is plenty of room before we reach maximum bearishness
The negatives are:
  • The momentum and intermediate term trends are downward.
  • There was way too much call buying yesterday.
  • While the bulls have definitely backed down, we have not yet seen capitulation or the shorts get aggressive.
  • Fundamentals and valuation do not support the market.
  • The market went straight up 70% so straight down cannot be ruled out.

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