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[Pabst]

I got short in a big way last Sept. 29th. Lo and behold I've been building a big short position this week. The fractal/measured move work I use suggests strong resistance on these swing highs. It did last year as well. Granted those highs were a retest of the prior all-time highs made in 2000. However these highs are also a retest of all time highs, albeit levels made a mere 10 weeks ago. One irony. Last years ramp was the follow through off lows made on July 18th. This year we all know what happened around July 18th. So I'm on the fence. Is this year the same or the opposite?

[dcengr]

Last year's low in july was marked by a few factors: 1) Threat of rising rates from Ben (who raised rates) 2) Middle east volatility 3) Earnings concerns By October, a few things had changed: 1) Ben stopped raising rates 2) Middle east calmed down 3) Earnings were better than expected This year's low in august was marked by these factors: 1) Sub-prime meltdown 2) Yen carry trade unwinding By October, a few things changed: 1) Ben lowered rates 2) Yen stopped rising, but hasn't gone back down yet A few things I'm looking at are: 1) Liquidity as marked in junk bonds - PHK in particular 2) Recovery of the index that dropped the most - BKX.. note that in last year's low in July to September, techs had recovered a good chunk and they were THE WORST PERFORMERS 3) Volatility index - which has dropped from its highs, but relatively elevated I don't think the bad news out of sub-prime and housing is done and over with any time soon, but that doesn't necessarily have to affect overall market action. The key going into this period (IMO) will be earnings, and whether earnings were hurt this quarter due to sub-prime mess.