I’m a bit disappointed by the bears lately , with some huge problems in Italy and Sequester so far a non event – mkts has got down to 1485 on SPX , which was as fast quick 50 point decline in mkts – but mkts got up fast again and looks like will try to test the highs once again.

So far has been a fantastic week , as we started out with shorts with Italian votes early this week where I were able to scale out of shorts near the 1485 bottom on SPX. Then I went long from 1485 to 1510 area and made a bit on the mini rally up , but late in the week tried out with shorts again , but it seems like bulls are just about to take over again , and it is possible I might take off all my shorts again which I bought Thursday last week.

Here are the MAIN issues I see with bears near term:

1. VIX might have formed a top head and shoulders pattern , which means that mkts could soon set a rally if we dont take out 19 on VIX near term ,, if VIX breaks down mkts will rally – so right now VIX is looking bearish to me , which is “bullish” for stock market.

2. EURO has been having a HORRIBLE month so far , as I called 1 month ago that the US dollar would rally big – the euro has taken a big dive to downside. HOWEVER by all surprises , mkts has been holding up pretty well with a big decline in euro ,, and it SEEMS to me that euro could soon see a SHORT TERM rally before going lower. IF euro is going to move higher near term , then MOST LIKELY stock market will move higher ,, so this is another bullish option for market.

3. TLT has also had a pretty good month , however stocks has been holding great still. It looks like TLT might soon have a pause , could go a little higher before a pullback – but I think a mini pullback in TLT might be due , and this would also be bullish for mkts.

Conclusion: All in all – my weekly chart SUGGEST that we are in a “downtrend” so far – as long below 1530. HOWEVER I’m seeing many “bullish” signs that a very short term rally might occur soon – not saying it WILL – but I think we could go up higher if VIX starts to move down with euro going up and TLT going down which is very likely in the near term.

If this is the case I’m going to exit all shorts early this week and enter some long positions with small caps.