Trapped Bulls

The market's favorite foes - Fannie & Freddie - extinguished this morning's rebound effort resulting in another disappointing session.

My first impression upon my return is that the market is trading in a manner that suggests that we still have a number of trapped bulls. I'm sure you probably know that already, but that's my first impression. To be sure, the powerful countertrend rally we saw unfold in previous weeks really sucked in a lot of people (as all counter-trend rallies typically do). Now, the market is searching for direction ahead of another earnings season with quite a few savvy pros predicting that we either need a panic low before we hit bottom and/or much better news. Clearly, both will help, and we'll likely get them in due time.

Much like my how to catch a falling knife post last month, I'm lowering and resetting some upside targets to trigger when (not if) we rally from here to make sure I know when the character of this tape has significantly improved. We "should" see at least a half-hearted relief rally attempt very soon (if not within the next week), and the strength of that rally will provide us with another clue to how to reposition further if needed.

Patience is still needed here as the market grinds up and spits out those who try to catch every blip and dip.