Interesting Monday.

I wrote on Friday that it was the calm before the storm. But given the size and nature of the overextended / overbought market, the sell-off has not been that severe, at least not yet.

Greece will default no matter what. Question is when. One report is saying that it will happen in the early March. (http://www.examiner.com/international-trade-in-national/greece-plans-orderly-exit-of-the-eurozone ) But I think early April is more likely. Germany is tired of handing out money to Greece and they are only buying time. Question remains of contagion. Have LTRO been able to provide a cushion to the European banks from the coming shock? Next in line is Portugal and Spain. But short term trading in Wall St. is devoid of fundamentals. It is all about set up. So today SPX gaped down in the open but reduced the gap at the close. It was all about squeeze the short and keeping the bulls interested. If you look at the variances between Euro/USD, AUD/USD and GBP/USD, you will see that it is more of short squeeze than a rally.

SPX touched the Fib.23.6 level and reversed. Let us see how it behaves tomorrow and day after.

The US Dollar rebounded of key support area at the 38.2% Fib. extension. If this level holds we will see more weakness in equity in the next few days.

The general consensus is that we have a top in SPX at intraday high of 1333. But I think we have not seen the end of the Bull Run yet. This high may be tested very soon and rejected before we can call a short term top and before we see some sustained weakness.  As I always ask myself, where we are in terms of the sentiment?

Yesterday Mr. Gábor Jandó shared an interesting chart in Cobra’s forum which is as follows:

According to him, we may have a final blowout before meaningful reversal.  It is very likely that we will have this situation. So for now, we have to trade like day traders. Take each day and adjust our trading strategy.  The market will do the most unexpected thing to hurt maximum number of traders and so lets be prepared for the worst.

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