7/17T10:09 Strategy

I was long the indices for the 1st half hour today and booked a gain. Now all the indices are trading down at their lows. Gut feel: This is a two or three day short covering rally. Look for stocks and the indices to hit resistance and falter.

Financial stocks: WFC and JPM have now set the bar for other financials. Both had better than expected numbers. So just like we should have been prepared for good events because the markets were so oversold, now we can anticipate negative news out of some bank or broker that should squash the rally. I feel we need to stick to our guns and look to add to shorts when the 60 min. charts set up. Nothing has changed fundamentally, business is awful, JPM stated that now the prime mortgage business is in serious trouble.

Gold & Silver: I sold off the excess positions yesterday to avoid a follow through sell off today. None has occurred. If we get another 60 min. buy signal during the day I want to reposition GLD and SLV.

Bottom line: The primary trends are all still intact. There has been short covering and a need to relieve the severe oversold readings. Watch the 60 min. charts for signs that the bear market rally is coming to an end and look to rebuild short position.