It looks like the bears were caught in a bit of a squeeze as they piled in on the poor consumer confidence number and over-anticipated how quickly yesterday's low volume bounce would fade. The short trade certainly seems logical here, but making a living on the short side of this market has been quite challenging since March 2009.
Although the short side isn't easy I'm leaning more that way as I've been flipping recent long buys and locking in some gains. I've always taken some ProShares UltraShort S&P500 (SDS) and am starting to hedge a bit more, but I'd like to see the Federal Open Market Committee (FOMC) minutes which are due out at 2 p.m. EDT, before doing much else there. I think we could see some selling pressure pick up if there is evidence of some dissent in the Fed ranks.
I've had some good bounce trades lately in holdings such as Coffee Holding (JVA), Jazz Pharmaceuticals (JAZZ), Richmont Mines (RIC) and VirnetX Holding (VHC), and I like the idea of putting some of the winners on the board by locking in gains. If the market continues to trend up, which I'm beginning to question, I'll have to work hard to find some entries. If it pulls back, however, then I'll be in good shape to remount some of my favorites.
At the moment I think it's time to shift to a more defensive posture especially as the end-of-the-month window dressing pressures come to an end.