May 11

Weekend Outlook for 13th May 2013 – Bulls still in charge – will markets ever go down?

Markets kept going higher and from last week gap up on unemployment rate came as a surprise to me and had a breakout target of around 1630-1640.

As markets already were up a lot on the job Friday and I saw that my UVXY (fear trade) positions was holding up better than mkts I were just thinking about holding my shorts tight even if mkts should go up to 1630-1640 level.

This week we hit the text book breakout level and topped at 1635 , which might very well be the final top before correction begins.

1. VIX again down to low levels 12-13 where mkts topped short term nearly everytime VIX as those low levels. Going long VIX is great down here imo I dont think fear levels will go much lower from current levels.

2. NDX hitting a WEEKLY trendlin resistance , big resistance on weekly chart suggesting that a top might be in or close on NDX too.

3. As SPX hit my 1630-1640 level I indicated to members in chat – I said wait to go heavy short at those levels. We hit 1635 and went down from there end of week – however I WONT RULE OUT a push to 1640 trendlins (look SPX chart) before we flush down.

Either way – upside is very limited here , even if we should start the coming week with a gap up to probably 1640 – again I wont rule out this option – however as I see it now we got into mid 1630-1640 target spot and I think this might very well be the final top before correction already begun.

Small caps been a lot stronger but hit 975 resistance on RUT so this might also hold for next week.

I’m long UVXY and long SOXS (short semis) this one has been my largest looser so far – but again if you can have some patience I think we will end up with profits. (Long UVXY 6.5 not far away from profits here)

So again the upside seems very limited here and I would short mkts at current levels , bullish sentiment also sky high but as you know , its very hard to just trade based on sentiment because we can be overbought and oversold for longer time.

It seems like no one ever think mkts will go down anymore and this week has been pretty boring without any big news/data. We got some news out Friday close about FED might tap the bond buying – we will see reaction on Monday if anything.

All in all – I remain long fear index UVXY (VIX) – and long SOXS (Short semis) as I believe the risk/reward trading for upside now is extreme limited and downside is huge short term from here.


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