On price action the broad market has staged a powerful rally from the March lows. Many market watchers are calling for a resumption of the uptrend and new highs, based on the swiftness of the recovery and the tendency of this market to "shrug off" (ignore) cracks forming in the US economy, a collapsing housing market and a "foreclosure tsunami" (sub-prime and more recently alt-A lending meltdown). It all smells like a roast, the amateur shorts are getting their clocks cleaned on this rally from the lows, the newbie funds are getting suckered into buying this rally and joe schmoe is being told that the glitch is now over, "time to buy again". Call me a conspiracy theorist if you want, but I don't buy this rally. The chartist in me says, ok well the chart is pretty bullish aside from the volume. On the DIA (dow jones) weekly chart this run looks like a text book bear flag on the linearly declining weekly volume, but one cannot deny the strongly upward price action:
On the other hand my gut continues to tell me this market is toasted and in for a long and potentially steep decline. I especially like shorts in the banking sector, companies like DSL, FED, CCRT, COF, BKUNA and even the higher tier firms like GS, MS and BSC. Also, retail is set to do a major face plant soon, I like GES, COH, CHS and NKE among other shorts. If you feel the itch to get long, betweenthebars found a great one in the silver miner SLW and I think he also recommends the health care company CELG. The biotechnology sector has been a strong performer lately and we may be in the midst of a baby boomer health care rally. IMCL, GILD and MRK have nice charts in that area. But I would be very defensive in nature on any long since in my view little stands in the way of another "glitch" day.