The downtrend looks like it has started. It is now time for a game plan.
If there one thing that I've learned it is the market never does the same thing twice, unless of course everyone has had enough time to forget about what has happened. During the last down spike, everyone was looking for a larger correction, just like what happened during the summer of 2006. Of course what ended up happening was that the market shot down, sucked in a bunch of shorts and then shot right back up. I would expect a lot of people are looking for the same type of reaction. The only problem is that there are already a ton of shorts.
So what is my plan? I expect everyone to jump back onto the long side too early. I'm going to short the first big up spike (around 200 Dow points) and then ride it down. I'm also going to start building my buy list and will get very aggressive if we get a solid follow through day.
On a final note, I find it funny that so many people are finally talking about interest rates. Anyone who has been listening to TFNN has been expecting this break in bonds for months. Inflation is going up. Rates are going up. It is simple. Tom O'Brien is expecting a bear market due to stagflation. Will he be right again?