The Monday Bounce

Late Friday it looked like we were setting up for what has become a weekly ritual, the Monday Bounce. But those pesky Europeans have thus far  put the kibosh on a rally. If we get a typical Monday bounce I will be looking at the short side.
  • Sentiment is at an extreme level where we have typically seen a negative risk/reward profile for the market. Sentiment moderated a little with the European scare but there has been very heavy call buying the past 3 days.
  • Who does not expect a year end rally at this point?
  • Seasonality is less of an issue for the next couple of weeks as we have passed the beginning of the month. As we approach Christmas seasonality will favor the bulls again but for now its neutral. 
  • Although not a great reading, we are slightly overbought.
Any shorts I add today would likely just neutralize my modest long exposure. I see little reason to remain long given the factors outlined above. I will likely use options in going short as insurance has become cheap with the VIX at 18.

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