Aug 13th

We have a cycle low somewhere near Aug22nd. We put on short positions on HGG, SPY as said in the post previously. We have not made any progress on the spy short but HGG has given way nicely.

This has been a very interesting rally, to say the least. The most shorted names have been squeezed hardest and rallied most. We have been amazed by its resilience too, inspite of our bullish stance and forecasting it right in the first week of july.

The price component (38.2% retracement) on the SPX has already been satisfied beginning of august. Maybe, we are just waiting for all the markets around the world to complete their 38.2% retracement. In particular, we are waiting on australia (AORD) which has been a laggard thus far . We ideally want to see some expansion in volume. Light volume rallying is bullish and can continue indefinitely. We want to see huge volume, whichever side it may be.

If our timing model is right, we need to see selling right from the get go starting latest by next week - otherwise we will be forced to sit back and quit our positions. We are giving the rally one more day tomorrow to make a new high. This rally has not been about price, but about time.

Addendum:

0. Keep an eye on JNK. We are beginning to see weakness, implying the rally is on borrowed time. Bears need to look for the ratio JNK:LQD to fall. Thus far it is promising.

1.We recalculated some possible scenarios and weighted them according to fib retracements and our cycle times. We believe a move upto SPX 1033 could occur. According to this scenario, we should then see a large retracement to 950 or so, which is the first target, the bulls will ofcourse buy this retracement. But we believe this will be short lived. We should see the entire gains from 850 or so erased by november.