I covered my SPY short that I initiated yesterday morning at the close. I remain defensively positioned. Topping is a process where we often see multiple attempts at the highs before the market finally gives way. The reason being that those who were under invested for the rally use the dips to increase their positions.
The large AIG offering was a good opportunity to take a stab at the short side. I will be relying on my sentiment indicators to guide me as to when there is excess bullishness. This may lead me to take more stabs at the short side in the next couple of weeks. There was a good amount of call buying yesterday despite the down day. I suspect we are in the excess optimism stage of the rally and are topping out but will wait until I see the white if the bull's eyes before making more short side attempts.