It has never been easier to make both technical and fundamental arguments against this market. There are growing concerns about the global economy as the indices become extended and run into heavy technical resistance.
Market players have been greatly relieved that stocks have recouped a big chunk of losses from the downtrend in the fourth quarter and are extremely hopeful that it is smooth sailing ahead. Talk about retests or even mild pullbacks is being shrugged off as needless. That is easy to do when there is constant dip buying.
As I've discussed, the indices have not only trended straight up since December 24 but have been remarkable one-way. The S&P 500 (SPY) has closed higher than it opened for 11 straight days. That is remarkably consistent buying for a market that did just the opposite for 10 days in December.
The market has tendency to overshoot in both directions. It overshot to the downside in December and, I believe, it is overshooting to the upside now. However, before I short aggressively I want to see a shift in the price action. By that I mean I want to see the dip buyers back off and for the indices to close lower than they opened. That would be my signal for additional shorts.
The big risk here is that there will be positive news on China or the government shutdown but this action is creating the potential for a 'sell the news' reaction if and when those events do occur.
I'd much prefer to be doing some stock picking in names like Aurinia Pharmaceuticals (AUPH) and MediWound (MDWD) , but stock picking is very poor right now. I'm looking for a short index play and the action today suggests that is developing now.