January 8, 2015:

BEARS FEAST AS THE BULLS’ HOPES ARE DASHED BY REALITY

Here are some random observations before we get into today’s analysis:

• The risk markets are in full bear mode now.Rallies must be met with skepticism for the time being.We’ve been calling for misery for the risk bulls in 2016 – and this week’s action has done nothing but validate our bearish outlook.
• Stocks should continue to have trouble until a floor is found – down at 1900 on the ES futures by our estimation.However, a violent rally could follow – as they tend to do in bear markets.
• Don’t be greedy on the short side – take profits before downside targets are touched.You can be long of risk assets after downside targets are met – as the bounces can be rewarding.But, be ready and willing to sell near upside targets as the following move back to the downside will almost certainly mean new lows.That’s the definition of bear market action!