While we were right about the bears losing their aggression heading into Tuesday’s market session, we do not believe that they are closing up shop; meaning the rally that we saw today will be used as an opportunity to reload their short positions. And like we said before, we are going to use it to do likewise ourselves. Going forward, we are targeting a couple of leveraged ETFs and small to mid-cap stocks to short as we believe weakness in the market will start springing up again.
The Fed meets tomorrow which could add some volatility to the markets, but unless they cut by 75 or 100 basis points (the latter of which is extremely unlikely), we doubt that they will drastically affect the outcome of the markets. Wall Street has already priced in a 50 basis point cut and we don’t foresee them cutting more than that. Also, the Fed’s power to affect the markets in a positive way over the past few months has been almost non-existent in terms of rate cuts and it shouldn’t be any different tomorrow.
Here’s the Nasdsaq and S&P charts…
