MARKET COMMENTARY (2-10-09)

So, my current allocation is 22% long/10% short/RIC. Nothing special, I know that. I didn't remove my existing shorts, but I plopped on double the longs at the open. There will be a point where I do go massively short, for only 2 days, and that will come very soon. This is to catch the top end of the spike for a quick double-digits, and then, who knows what happens? We could head higher or lower, I simply do not know what will happen. If you missed the entire rally and are planning to go long tomorrow for a swing, then you might be better off waiting for a major pullback - just a thought. You do not have any buffer to protect yourself against one up here.

As for the short signal, for a 2-day short spike play, I need to see a number of reversal candles, such as doji, hammers, shooting stars, black-filled bearish gap ups, dark cloud covers, etc., combined with resistance at a MA such as the 20- or 30-day, and short-term technical overbought levels. Combine these three, and the short-side Spiker™ is highly successful when nearly all components of the sector exhibit similarities. It's obvious which sector best qualifies (hint: you make deposits in these).

On bottoms - bear market bottoms are carved out over a lengthy period of time. It is proper to assume that this is another bear rally, until it isn't. On a technical level, a bear market is over when the market is able to breakout above and stay above the 200-day MA, which is over 335 pts on the SPX. On the short-term, there will be significant resistance at 745-750, which is the location of the November lows, and the 20-day MA. Depending on what happens at this pivot point, we could head much higher, or make a new low. Right now, enjoy the long side and I'll alert you to the day to short the Spikers™.

Near-term resistance is at the green lines drawn on the 10-day chart. The red line is the 10-day MA.

On a personal note, I adopted a black lab puppy, and will be giving it away in the morning to a trusted friend. He is TOO MUCH WORK, but it was fun while it lasted.

Don't forget to try the Free Trend Analysis. It's FREE, so give it a shot!